COT Report: Money Managers Turn Bullish On Precious Metals And Agricultural Commodities While Staying Careful And Inactive On Oil

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Summary

Money managers are inactive in the oil market for the fourth week in a row.

Money managers returned to buying gold and silver after two months of continuous sales.

Money managers reduced net short position in corn and wheat.

Oil

According to the latest COT report, over the week ending January 10 the money managers minimally changed their position in oil. They closed 3,566 previously bought and 5,007 previously sold oil contracts. As a result their net long position rose by 1,441 contracts amounting to 305,909 contracts.

The market liquidity insignificantly increased by 1.3% - WOW.

The money managers' net position and the oil market liquidity are at three-year highs, which may provoke a downward correction amid any negative prediction.

Gold

After eight weeks of continuous sales, the money managers expectedly returned to gold purchases. Over the last week they were actively closing previously sold contracts as well as bought the new ones. As a result the money managers' net long position in gold rose by 57.4% in a week.

Over the mentioned period, the market liquidity grew by 4.8%, but still remained below its two-year average.

Obviously, besides being strongly oversold, the gold market is supported by the uncertainty of the future Trump policy that has only risen after the recent press-conference. The decline of the dollar, as well as the U.S. bond yield, also encourage buying. In my opinion, if the gold price overcomes $1206, the further growth up to $1250 may be expected. Any new Trump tweet will contribute to this growth.

Silver

Naturally, along with gold, the money managers were also buying silver, although not so actively. On the week the money managers' net long position rose only by 9.9%, amounting to 46,169 contracts.

The market liquidity remained almost unchanged at the level of the two year minimum.

In general, all that concerns the gold market is also relevant for the silver market. In my opinion, the price is likely to increase further.

Corn

On the last week, the money managers were buying corn even more actively than a week earlier. Their net short position in this market reduced by 19,805 (-20,6%) reaching 76,564 sold corn contracts.

Market liquidity is growing for the sixth week in a row.

It may be too early to say that the corn market has become bullish, but against the background of the money managers' actions, one should not expect a substantial corn price reduction in the near future.

Wheat

The money managers were buying wheat even more actively than corn. It is noteworthy that over the week they closed 17,823 previously sold wheat contracts but bought only 802 the new ones.

The market liquidity increased by 3.8%, approaching the two-year maximum.

The money managers are actively locking in profit on the sold wheat contracts, and this could push the wheat futures price growth to a level of $4.5 in the coming months. The USDA information on the reduction of winter wheat planted area in the United States in the current year catalyze this process.

Soybeans

The current COT report does not inform on the actions of the money managers after the USDA forecast from January 12, followed by a sharp rise in soybean futures price by 4% over just two sessions. Therefore, the figures of the current report do not have practical benefits. So it is worth waiting for the next COT report in order to see whether the money managers returned to buying in this market.

Conclusion

So, the money managers are inactive in the oil market for the fourth week in a row, holding their net long position at the level of the three-year maximum. In my opinion, this market is now at the risk of light correction.

The money managers are buying gold and silver amid the strongly oversold market, the U.S. dollar decline and the uncertainties associated with the future Trump domestic and foreign policy. Therefore, growth in the short-term perspective is probable.

The money managers are actively locking in profits on the sold wheat and corn contracts, which indicates at least a strong price support in these markets.

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.