Hedge Funds Up Bets On Commodities

Oct 17 2011 | 9:04am ET

Money managers are betting on higher commodity prices for the first time in five weeks.

Data from the Commodity Futures Trading Commission shows speculators’ combined net-long positions across 18 U.S. futures and options rose 0.2% to 656,691 contracts for the week ending October 11.

The Standard & Poor's GSCI Index of 24 commodities rose 5.2% last week, its biggest jump since December.

According to Bloomberg, hedge funds had cut their bets by 49% in the previous four weeks.

Of the 24 futures tracked by the S&P GSCI, 21 rose last week, including sugar (up 11%), soybeans, crude oil (which reached a three-week high) and cattle futures. Cotton, nickel and aluminum fell.

Speculators showed themselves most bullish on energy last week, with a 39% gain in heating oil, a 23% gain in gasoline and a 7.8% gain in crude oil, according to the CFTC. Funds continued their love affair with gold, boosting their bets by 3.4% and upping those on silver 1.3%.

On the other hand, speculators dialed back their bets on corn, soybeans and coffee, despite rising prices for those crops and bearish bets on copper were up 80% from a week earlier, leaving investors with a net-short position of 9,489 contracts.

Investors redeemed $275 million from commodity funds in the week ended Oct. 12, the lowest amount in three weeks, according to Cambridge, Massachusetts-based EPFR Global, while funds focusing on gold and precious metals attracted $72 million.

Cameron Brandt, research director at EPFR, told Bloomberg the outflow was “a fairly small one, which sort of suggests a slowing down while people wait to see if this latest burst of optimism has any legs.”

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