Us Futures Positions – Gold Lower, Copper Peaking?

By Rohan Clarke, Data Diary

Latest Commitments of Traders reports (here) confirm that deeper pocketed speculators continue to exit their gold positions:

Managed money longs have declined through the July 2009 lows and are threatening to revisit levels last seen in March 2009.  (Note the boxed area in the charts reflects the period since gold bottomed in October 2008.) And to put that into a longer context, following is the net positions in the old format CFTC reports.

The reversal in open interest is also threatening the trend.

We could argue that this is a reflection of tighter global money on a relative basis.  The increase in reserve requirements for China’s banks came into effect last week and the repo rate dutifully went beserk (here – Merrill over Matter has been following this).  Other emerging economies have been ratcheting up currency controls to slow circulation of USD.

Until there is evidence to the contrary, we’ll assume that this is a correction rather than a change in trend. The strategies being employed by developed world governments are based on a socialisation of the debt overhang.  As a result, government credit is deteriorating and the path of least resistance is to keep money loose. These trends have a ways to go.

It’s interesting then that copper has been dragging its feet. It’s possible that a top is in, but we haven’t seen a decisive move:

Mind you, the copper price bottomed after gold in 2009 (the copper low came in late December 2009). To place the current rally in context, following is the old format report:

Open interest tells a similar story – though the record levels in open interest is also interesting. Is this an acceleration in the financialisation of commodities? As we’ve discussed before, the introduction of the retail investor to the copper markets logically exposes it to greater volatility – especially to the downside.

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by Andrew Wilkinson, Senior Market Analyst at Interactive Brokers

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