COT Report: Gold, Wheat And Corn Markets Are Losing Liquidity

| About: SPDR Gold (GLD)


The money managers continue to sell gold. The market liquidity is falling.

The corn market liquidity fell to its historical minimum at a record pace.

The money managers hold a massive short position in wheat against the background of decline in the overall market liquidity.

The relative size of the money managers' position in soybean approached its historical highs.


The latest COT report published on December 4 informs about changes at the market during the week ending November 29, i.e. one day before the OPEC summit, which adopted a decision to reduce production, resulting in a sharp rise in oil quotations. Therefore, the latest COT report is of no interest regarding oil, because it doesn't inform about the money managers' actions after the OPEC decision.

However, according to the established tradition, I attach the updated key charts with information on the oil market changes, which, by the way, were minimal.


Over the past week, the money managers closed 11,224 gold contracts, purchased before, and sold 6,619 new ones. As a result, the money managers' net long position in gold decreased by 17,843 (-14.7% WOW) contracts, that exceeds the rate of reduction of the net position showed a week earlier. Thus, the money managers have been continuously selling gold for three weeks in a row. During this period, the money managers sold 19,853 new gold contracts and closed 53,129 gold contracts purchased before.

The market liquidity also continues to fall. Over the week, the open interest decreased by 5.2%, amounting to 600,844 lots. The gold market liquidity is approaching the minimum indicators of the annual period.

The money managers remain clearly negative towards gold. The liquidity of this market became closer to the level of the end of 2015, when the gold price updated its long-term minimum. Nevertheless, the money managers continue to sell and that gives reason to expect a deeper drawdown of gold prices in the near future.


The money managers were almost inactive towards corn, but their actions were still bearish. Altogether, the money managers sold 8,106 new corn contracts over the week, and closed 761 contracts, purchased before. As a result, the net short position rose by 8,867 (+14.7% WOW), amounting to 69,261 sold contracts.

Also, two records were set over the week in terms of the market liquidity dynamics. Firstly, the open interest shrank at a record pace to 15.8% WOW. Secondly, the current size of the open interest amounted to 1,479,941 lots - this is the lowest level for at least the past year and a half.

The money managers' desire to build a short position, as well as the capital withdrawal by the market participants, clearly does not create preconditions for the growth of prices. A sideways trend with the risk of escalating into a new wave of decline is likely to continue.


As in the case of the corn market, the money managers were relatively neutral in wheat. Over the week, the money managers' net short position fell by 3.8% WOW, amounting to 118,509 sold contracts.

The open interest of the wheat market decreased by 107,303 (-17.1% WOW) lots over the same period of time. This is the fastest outflow of liquidity from the market, fixed over one and a half years.

Given the relative and the actual size of the position, it is objectively difficult to expect the money managers to continue to sell. However, the sharp market liquidity outflow reduces the bullish market potential.


The money managers continued to buy soybeans at a relatively rapid pace. Over the week, they bought 23,687 new soybean contracts. Given the insignificant sales, their net long position rose by 21,061 contracts.

The market liquidity continued to rise for the fourth consecutive week. Open interest rose by 5.5% WOW, amounting to 841,404 lots, which was close to the average level.

The share of the money managers' net position in the total amount of open interest reached 16%, which is close to the historical maximum. It is very unlikely that the money managers will continue to actively buy soybean in the future, without any obvious weather problems in South America. I think that for the moment the limit of the soybean futures price is $10.60.


So, in the gold market, the money managers continue to sell and market liquidity continues to decline. In this context, it is difficult to expect a sharp trend reversal from the market.

The liquidity of corn and wheat markets declined at a record pace, which greatly reduced the bullish potential of the markets. At that, the money managers' position in corn is far from its maximum, and, therefore, the pressure on the price on the part of the money managers may continue.

Soybean is positive - the money managers are buying and the liquidity is growing. However, the relative size of the net money managers' position indicates that they are probably not likely to continue buying.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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