Back into Commodities, especially Gold and Grains

Funds and large investors have begun to move back into commodities, especially gold and grains. According to the weekly data from the Commodity Futures Trading Commission, released last Friday with data from July 12, total speculative investments in U.S. based commodity futures (ex. options) rose by 13 percent to 1.111 million lots or 92 billion dollars in nominal terms. This was the biggest weekly rise since August 2010.

Increases were seen across all five sectors with the biggest percentage change being meats, while the biggest nominal change was metals.

Gold positions rose by 25 percent to 197,600 lots as the ongoing debt crisis in Europe triggered a new record high thereby attracting investors back to the yellow metal. This was the biggest surge in holdings since September 2009. Copper also saw a 25 percent increase as recent high prices and the outlook for future demand looks supportive.

Crude oil also saw renewed interest as traders began to believe that the International Energy Agency induced sell off would not stick with focus once again switching to the potential for future demand outstripping supply.  The net speculative change on the week for WTI however was flat as an increase on Nymex was offset by a reduction on the ICE exchange.

Long positions in the grain sector recovered strongly with the soybean sector seeing most of the increase. With attention now firmly back on fundamentals, after the recent bout of risk reduction, investors have returned as hot weather in the U.S. has increased the risk of lower output.

Sugar continued to receive interest from the fund community as the strong rally back to the 30 level saw speculative long positions increase by 5 percent last week.

Investors in Lean Hogs who initially had been caught out during the recent strong rally tripled their long positions last week to 14,000 lots, still well below the 40,000 lots that was recorded when the price hit these levels last time back in April.

Background information: The Commitments of Traders is a report issued by the Commodity Futures Trading Commission every Friday with data from the previous Tuesday. It comprises the holdings of participants in various U.S. futures markets split into "commercial" and "non commercial" holdings. The non commercial or speculative holding are typically institutional investors such as hedge funds and CTAs.