According to the CFTC Commitments of Traders report for the week ended August 7, traders turned less bullish towards the energy complex. They trimmed bets for crude oil and heating oil futures, while raising short positions on gasoline futures. Net LENGTH for crude oil futures fell -4 473 contracts to 608 927, resulting from reduction of -7 011 contracts and -2 538 contracts, respectively, on speculative long and short positions. Net LENGTH for heating oil futures dropped -3 275 contracts to 38 742. The decline in long positions (-3 805 contracts) was over 7 times of that in shorts (-530 contracts). Bets for weakness in gasoline price overwhelmed those for stronger price, resulting in a reduction of -1 552 contracts in NET LENGTH to 109 406 contracts. Net SHORT for natural gas plunged -19 273 contracts to 107 154 for the week. Traders trimmed bets on both sides. Yet, the decline in shorts overshadowed that in longs.
The market deepened their pessimism over precious metals, as US dollar strengthened and Treasury yields remained firm. NET LENGTH for gold gold futures declined -22 649 contracts to 12 688 last week. Meanwhile, NET LENGTH for silver futures dropped -1 523 contracts to 4 341. For PGMs, NET SHORT of platinum added +40 contracts to 8 143 while NET LENGTH for palladium was down -1 054 contracts to 3 542 during the week. Renewed geopolitical tensions in Turkey, Russia and Iran have raised demand for safe-haven assets. However, Japanese yen and, to a lesser extent, Swiss franc, rather than gold, have benefited. We believe gold’s appeal as safe-haven asset has diminished significantly from the period shortly after the global financial crisis, due to fictionalization of the metal as an asset class. Over 50 gold-levered Exchange-Traded Funds (ETFs) in existence today have has attracted short-term speculative money to the metal. Moreover, although the US has continued to struggle with twin deficits, the US dollar is still viewed as safe and remains the world’s biggest reserve currency. Treasury bonds continue to be a safe asset and is considered as a better alternative to gold holding with the high yields.