COT report: Broad commodities demand seen ahead of FOMC

The Bloomberg Commodity Index (BCOM) rose 2.3% during the reporting week, among others supported by a softer dollar and expectations for lower funding costs, as well as supply disruption risks underpinning the energy complex, and weak China data raising speculation about additional stimulus. Momentum was broad-based with all but three of the 25 major commodity futures advancing.

Energy: Crude oil, under pressure in recent weeks, saw the biggest jump in net longs in three months. The move was largely short-covering as traders responded to firmer prices and ongoing worries about Russian supply disruptions. The WTI net long more than doubled, and together with net buying of ICE WTI and Brent futures, the combined net long rose by 53k to 238k contracts, still within the recent range but showing improving sentiment. Diesel tightness continued to drive momentum in refined products, with the ICE gasoil net long climbing to a fresh 3-½-year high.

Metals: Gold and silver saw only modest position changes despite further gains into the Fed meeting. Managed money accounts trimmed longs in gold – profit-taking after a strong run – while silver attracted fresh interest on both sides, with new longs matched by increased short exposure. HG copper, previously whipsawed by tariff headlines, benefited from renewed stimulus speculation in China and the prospect of cheaper funding. Futures jumped 2.7%, lifting the managed money net long to a 14-month high of 42.6k contracts.

FOMC aftermath: Gold and silver extended their gains beyond the reporting week, with profit-taking after Wednesday’s widely anticipated cut quickly absorbed by renewed buying. Gold pushed through a fresh record above USD 3,700, while silver closed in on its August 2011 peak at USD 44.22. The rally is underpinned by strong ETF demand, lower funding costs, and a cocktail of macro risks – Fed independence, U.S. fiscal sustainability, geopolitical flare-ups, and even the possibility of a U.S. government shutdown. Importantly, four consecutive days of broad dollar strength have not derailed bullion’s advance, underscoring the depth of momentum. Markets now turn to fresh data, including European activity gauges and Friday’s U.S. PCE inflation report.

Agriculture: The BCOM grains index rose 2.2%, with all six major grain and soybean contracts posting gains. Soybeans and corn led the way, supported by findings in the latest USDA supply-and-demand update. CBOT wheat, still one of the least owned contracts, saw some short-covering but remains weighed by ample supply and a forward curve in deep contango, limiting prospects for a sustained rebound.

Elsewhere in softs, speculators trimmed a large sugar short from its recent six-year high, while light buying helped lift the cocoa long from a 2-½-year low.