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ChartBrief 109 - The big swings in commodity futures positioning

Here's a quick update on commodity futures positioning with the latest weekly CFTC COT report data. I've just picked out what I think are the 2 major standouts in the latest data, and while the two commodities mentioned have very little in common otherwise, the one thing they share is a big swing in positioning - but in opposite directions. Gold speculative futures positioning has lurched to extreme shorts, which typically raises the odds of short-term upside, but it's not a guaranteed signal as it can reflect momentum... or in other words, they could be extremely short for the right reasons! The other one is grains (composite across wheat, corn, and soybeans), and it shows a big swing from extreme shorts to fairly solid net-longs. Not quite at the point where you'd necessarily fade it, but it goes to show how there can be a lot of power in speculative futures positioning signals (i.e. note the reversal off the extreme shorts in May/June).

Gold speculative futures positioning is starting to look stretched to the downside. This suggests short-term upside risks, albeit our overall view on gold is bearish. Note that extremes can operate as reversal signals but also momentum signals e.g. see the 2013 episode.

As previously highlighted, speculative futures positioning provides reliable signals for grain commodities and the recent spike was presaged by the extreme shorts in the combined grains speculative futures indicator shown in the chart below.

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