Metals drove exodus from FOMC long speculation and growth fears

A week that saw a continued deterioration in the global growth outlook due to China’s prolonged lockdown and increasingly aggressive rate hike signals from US FOMC members. The S&P 500 lost 6.4% while the VIX jumped 12% to 33.5%. The broad Bloomberg dollar index rose 1.3% while ten-year bond yields fell 22 basis points to 2.72%.

Saxo Bank publishes weekly Commitment of Traders (COT) reports covering leveraged fund positions in commodities, bonds and equity index futures. For IMM currency futures and the VIX, we use the broader measure called non-trade.


The Bloomberg Commodity Spot Index fell 2.3% after hitting a post-Easter record, with all sectors posting losses, led by industrial metals (-5.2%) and precious metals (-4%). In response to these developments, hedge funds have reduced their bets on rising commodity prices to a minimum since last November. Seventeen of the 24 contracts saw net selling with overall net long duration reduced by 8% to 2 million lots, representing a $14.3 billion drop in face value to $149.3 billion .

The largest reductions were in the metals sector, led by gold and copper, followed by the soft materials sector. The energy sector was reluctant to add exposure, despite strong gains among fuel contracts.

The latest Crude Oil, Gold and Copper updates can be found in our daily Market Quick Take here


Crude oil was mixed with soaring fuel prices supporting a relative outperformance of the WTI contract, but overall a 12,000 lot increase in WTI was more than offset by a 14,000 lot reduction in Brent, in due to global demand concerns, leaving the net down 2,000 lots at 411,000 lots, and near a 17-month low.

Petroleum products soared amid tensions over Russian sanctions, with gasoil in Europe and diesel in New York (ULSD) both up 30% and 27% respectively. These changes, however, did not create any appetite for adding risk, with both contracts seeing only small changes.

The combination of growth concerns, particularly in China, and very aggressive rate hike statements from US FOMC members, combined with a stronger dollar, contributed to a dismal week for industrial and precious metals.

Speculators reacted to gold’s 2.8% decline by cutting bullish bets by 20% to 99,400 lots, with most of the change due to a long sell-off, not further short selling. A similar picture in silver which, in response to a 7.4% loss, saw its net long reduced by 36% to 26.5k lots.

Platinum saw 13,300 sell lots return net positions to a net short position for the first time since September. HG Copper fared even worse with speculators wiping the slate clean, with the net back nearly neutral for the first time since May 2020, when the price was trading nearly half of the current level.


The grain sector saw the net shrink from a ten-year high of 36,000 lots to 783,000 lots. Selling was led by corn and soybeans while wheat saw only a slight reduction in an already relatively weak bullish bet. The exception was soybean oil which jumped 5.4% in response to a growing global supply crisis affecting edible oils such as sunflower oil and palm oil.

The softs sector saw the biggest week of net sales since November with the strengthening of the dollar and a general deterioration in risk appetite triggering cuts on all four commodities, sugar and cocoa in the lead.


Another week of general dollar strength with the dollar index rising 1.3% saw speculators turn net buyers of dollars for the first time in four weeks. Net long futures against ten IMM currencies and the Dollar Index rose 8% to $15.7 billion.

The currencies with the most net selling were led by the Euro (-9.1k lots) and the British Pound (-10.7k lots), with the latter seeing net selling hit a high of 2 1/2 years at 69,600 batches. Yen short cover after hitting a 20-year low supported a temporary rebound, and with it an 11,700 lot reduction in net shorts to 95,500 lots, still by far the shortest currency against the dollar.

What is the Merchant Engagements Report?

COT reports are published by the US Commodity Futures Trading Commission (CFTC) and ICE Exchange Europe for Brent crude oil and diesel. They are released every Friday after the US closes with data for the week ending the previous Tuesday. They break down open interest in futures markets into different user groups based on asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Money Managed and other

Finances: Concessionaire/Intermediary; Asset Manager/Institutional; Leveraged funds and other

Forex: A wide split between commercial and non-commercial (speculators)

The reasons why we mainly focus on the behavior of highlighted groups are:

  • They are likely to have tight stops and no underlying exposure who is covered
  • It makes them most responsive to change in the fundamental or technical evolution of prices
  • It offers views of big trends but also helps to decipher when a reversal is imminent

Ole Hansenhead of commodity strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. ltdwhich is part of the Saxo Bank Group via RSS feeds on FX Empire

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