11 December 2017 at 8:55 GMT
The Bloomberg Commodity Index hit a nine-week low last week with all sectors suffering setbacks. In response to this weakness, hedge funds cut bullish commodities bets by 8% or 138,177 lots in the week to December 5. Hardest hit was the metals sector with gold, silver and copper all seeing major long liquidation.
- Gold, silver and copper all seeing major long liquidation
- Oil saw light profit taking after Opec+ meeting
- Natural gas got slammed as the US winter is late arriving
By Ole Hansen
Funds cut bullish gold bets by a record 64,257 lots up until last Tuesday. A stronger dollar driven by rising rates expectations and progress on the tax deal saw gold take the biggest hit in seven months. The gross short jumped by a record 200% to reach 30,272 lots, a four months high. Silver fared even worse with the net-long returning to the five-year average after seeing a 61% reduction, not least due to increased short selling.
The copper net-long dropped to a six-month low following a one-third reduction. This followed the biggest one-day slump in more than two years last Tuesday. Technical selling was triggered by raised concerns about the short-term outlook for growth and demand from China.
Crude oil profit taking following the successful Opec+ meeting only triggered a 10,000 lots reduction of the combined net-long in Brent and WTI to 953,000 lots. The strong conviction resulting in money managers holding almost one billion barrels of speculative positions into the quiet end of year period is not likely to be challenged unless Brent moves back below $60/b and WTI below $55/b.
Soft commodities were mixed with cocoa turning net-short again after just three weeks in the black. This in response to renewed and aggressive price weakness. Coffee was bought just before renewed weakness emerged after beneficial rain in Brazil boosted the potential crop yield and the BRL weakened on election jitters.
– Edited by Clare MacCarthy
Ole Hansen is head of commodity strategy at Saxo Bank