Hedge fund money in commodities up after May slump

Date: Monday, June 18, 2012
Author: Barani Krishnan, Reuters

Hedge fund money in commodities posted its first weekly gain in seven weeks, data on Friday showed, as investors waded into riskier assets after a June 11 rate cut by China and on hopes for relief soon to the euro zone crisis.

Hedge funds and other money managers raised their net long position across 24 U.S. commodity markets by $2.1 billion in the week to June 12, reaching a total of $58.7 billion, according to the data from the Commodity Futures Trading Commission.

In six previous weeks, the net long "managed money" in commodities had fallen by about $36 billion, or 40 percent, from just over $92 billion at the start of May, a review of the CFTC's weekly Commitment of Traders data showed.

The step up in bullish positions came ahead of Sunday's elections in Greece, which, analysts said was fraught with uncertainty for investors.

"At this point, it looks like the markets are frozen and waiting for the results of the Greek elections, which are totally unpredictable," said Dominick Chirichella, senior partner at Energy Management Institute in New York.

Greeks will choose between parties championing tough European bailout conditions and rivals calling on Athens to desert the euro. Analysts say stocks and other risky assets in the euro zone could come under pressure regardless of the outcome.

Commodities started the week of June 12 on a strong note as growing hopes for a solution to the euro zone crisis and a stimulus for the U.S. economy sent prices of oil to copper and corn surging.

The 19-commodity Thomson Reuters-Jefferies CRB index -- a global benchmark for the asset class -- had its biggest one day jump in three months on June 6, before paring gains through the week.

A surprise rate cut by China on June 11 also helped sentiment, although the positive impact from that soon faded after worries that Beijing's stalling economic growth could be bigger than what any rate cut could immediately fix.

Soybeans saw the biggest inflow in managed money for the week of June 12, adding about $34 million in net long positions, the CFTC data showed.

Aside from hedge funds, other large speculators also raised their net longs position in soybean futures and options on the Chicago Board of Trade during that week, taking bullish bets to the largest level in a month.

Natural gas witnessed the largest outflow -- $16 million -- to reach a total net long of $3.3 billion in managed money in the week to June 12. It was the second straight week that gas had seen a drop in net longs.