Speculators reduced Bullish bets on commodities for the 3rd week running, the longest run since April, as prices erased this year’s gain on mounting concern about slowing economic growth.

Hedge funds cut net-long positions across 18 US futures and options by 0.2% to 1.18-M contracts in the week ended 23 October the lowest since 24 July, US Commodity Futures Trading Commission data show.

Copper holdings fell the most in 7 wks, and Sugar wagers dropped to a 1-month low. Bullish bets on Gold fell the most in 3 months.

The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped to a 12-wk low on 26 October, 2 days after the US Federal Reserve said that the strains in the global economy present “significant downside risks.”

Services and manufacturing in the 17-nation Euroarea contracted more than economists forecast, and orders for US capital goods stalled.

The fact that there has been liquidating in commodities is related to the perception of the global economic slowdown, people are getting out of the more economically sensitive types of commodities.

The S&P GSCI fell 2.6% last week, the most in a month, and the MSCI All-Country World Index of equities retreated 1.6%. The USD added 0.6% against a basket of 6 major trading partners. Treasuries returned 0.1%, a Bank of America Corp NYSE:BAC index shows.

21 of the 24 commodities tracked by S&P dropped as the number of contracts outstanding across the group contracted for the 1st time in 4 weeks.

Copper declined 2.4%, the biggest loss since 6 July, Gold fell for a 3rd week, the longest losing streak since September 2011.

Commodity prices may be bolstered as central banks do more to revive growth,The GSCI rose 11% in Q-3 as the Fed announced its 3rd round of quantitative easing.

The US economy grew at a 2% annual rate in the three months to 30 September, US Commerce Department data showed on 26 October topping the median economist forecast for a 1.8% gainer.

US consumer confidence rose to a 5 yr high in October, and home sales reached a 2 yr high in September, figures showed last week.

Investors lowered wagers on a Crude Oil rally by 17% to 138,340 contracts, the lowest since 31 July CFTC data show. Futures declined 4.2% in New York last week, the biggest drop since 21 September.

Bullish bets on Sugar dropped 17% to 45,966 contracts, a 4 wk low. Prices slipped 4.3% last week. Investors increased their net-short position in Coffee by 23% to 16,060 contracts, the most Bearish since 11 September. Prices fell for a 4th straight week, the longest slump since 15 June.

A measure of net-longs for 11 US farm goods rose 11% to 684,229 contracts, CFTC data show. That is the 1st increase in 7 weeks and the biggest gain since 10 July.

Cotton holdings increased more than 10-fold to 21,666 contracts, from 2,045 contracts a week earlier. Futures fell 5.8% in New York last week, capping the biggest slide since 1 June. Cotlook Ltd., the publisher of a benchmark Cotton index, boosted its estimate for a global surplus by 16%, citing higher output in China and India, the Top producers.

The recent selloff in commodities is more a reflection of concerns about slower growth prospects, with the rally in commodities earlier immediately after the stimulus announcement, one expects to see some de-risking takes place. Stay tuned…

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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