COT: Trade Hopes Cut Demand for Gold; Oil Bought Again.

COT on commodities in week to November 5 showed how trade hopes and weather developments drove position changes from oil and natural gas to gold and coffee
Ole Hansen
Container Cargo ship in the ocean with Birds flying
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The below summary highlights futures positions and changes made by hedge funds across 24 commodities futures up until last Tuesday, November 5. The reporting period covered a week where trade deal optimism continued to run high with stocks and bond yields both rising while the prospect for further U.S. rate cuts continued to deflate.

Just two months ago the appetite for key commodities among speculators, i.e. leveraged money managers or hedge funds, hit rock bottom. Back then the net-long across the 24 major futures tracked in this report dropped to a record low of just 38k lots. While the Bloomberg Commodity Index since then has only managed to recover by 2.2% the net-long has nevertheless jumped and last week it reached 587k lots, a 15-week high.


Conflicting news on tariffs roll back created a very volatile week for gold and silver. Ahead of Thursdays additional weakness the net longs in both had been cut primarily through increases in gross short positions. In gold the gross short jumped by 15% to 31k lots, a 22-week high. Both metals have been challenged by the recent rise in bond yields which have cut the total amount of negative yielding debt globally to $11.6 trillion, a one-third reduction since the August 28 peak. The improved outlook for has also led to a reduction in U.S. rate cut expectations.

Despite its worst weekly decline since November 2016 gold has yet to break any major technical levels. Using retracement levels from the run up since May the levels we focus on are $1448/oz, $1413/oz and most importantly $1380/oz, the range top between 2014 and June this year.

Continued copper buying reduced the net-short to 18k lots, the lowest since April 30. Another sign that the market is sensing a change in the outlook and with that reduced appetite from macro funds to hold short copper positions as a hedge against an economic slowdown.

However having failed last week to break above the 200-day moving average at $2.7280/lb and with the speculative short much reduced the short-term outlook could now become more challenging.


Bets on rising energy prices rose by more than 100k lots in the week to November 5. Trade optimism and the prospect for further OPEC supply cuts supported a third weekly increase in WTI (+12k lots) and Brent (+28k lots) crude oil longs. During the past three weeks funds have bought 109k lots, still less than the 180k lots that was sold the previous three weeks.

A November chill across the eastern U.S. has helped lift natural gas prices and demand and as a result the net-short was halved last week.

Speculators cut short positions in Arabica coffee by 30% as the market tightens on concerns adverse weather in Brazil will lower yields.

Hedge funds have due to the forward curve structure been holding a profitable net-short in coffee since 2017. The short periods of recovery during this time has mainly been driven by short-covering and whether this time is any different remains to be seen.

Support has however started to emerge with the outlook for a rising supply deficit into the 2019-2020 season from a surplus the previous period.

The cotton short more than doubled ahead of Friday’s price supportive WASDE report in which it delivered a bigger-than-expected cut to US and global supplies.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.


Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Start trading now

This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.