Hedge funds in major commodities rethink

Hedge funds in major commodities rethink

Pushing bullish bets up a few bars

With weakness returning to equities and oil on Monday, gold futures trading in New York attracted brisk buying from investors eager for alternatives amid all the market turmoil.

In afternoon trade gold for delivery in February, the most active contract, was exchanging hands for $1,106.60 an ounce, up more than $10 compared to Friday's close.  Thanks to safe haven buying gold is now up 5.4% since hitting a near six-year low mid-December.

Anticipation that the US Federal Reserve will raise rates for the first time in nine years, prompted large futures speculators or "managed money" investors such as hedge funds to dramatically raise bearish bets on the metal in the final months of 2015.

Bets that gold could be bought back at a lower price in the future hit a record during the final trading week of 2015, but this year overall positioning is firmly back in the black.

Net short positioning – bets that gold could be bought back at a lower price in the future – hit a record during the final trading week of 2015, but this year overall positioning is firmly back in the black.

According to the CFTC's weekly Commitment of Traders data released on Friday speculators added to long positions – bets that prices will rise – and trimmed short positions, albeit modestly.

The gold futures market hit a net bearish position of over 24,200 lots or more than 2.4 million ounces, but is now back to a net long position of just over 1.9 million ounces.

Speculators also nearly doubled silver long positions, but copper bears pushed the metal further into the red  reaching a near record net short positions of  385,000 tonnes. Platinum longs were cut nearly one-third, while hedge funds added palladium lots. Both PGMs remain in small net long positions.

Across 24 commodity futures markets money managers cut bearish bets by 74% according to data by Saxo Bank led by better sentiment towards crude oil where record bearish bets were cut by more than 8%. Two weeks ago, across all commodity futures net short positions increased to 112,000 lots, the highest since government records began in 2009.