Reuters

By Barani Krishnan
NEW YORK | Fri Sep 14, 2012 6:44pm EDT

(Reuters) – Hedge funds and other big speculators pumped more than $6 billion into U.S. commodity markets this week, the most in three weeks, just before the Federal Reserve announced a third round of stimulus for the U.S. economy, trade data showed on Friday.
With gold, oil, metals and crop prices already at or near multimonth highs, the speculators raised to above $117 billion their net long positions across 22 commodity markets tracked by the U.S. Commodity Futures Trading Commission.
CFTC’s data of traders’ commitments, calculated by Reuters according to market value, showed that hedge funds and other big speculators injected $6.3 billion in new net long money into the markets during the week to September 11.
In two previous weeks, fresh bullish bets on commodities by such funds — known by the regulatory moniker “managed money” — were under $4 billion a week. A week prior to that, some $13 billion came in.
“It looks like speculators were right on the money, building positions after the ECB move and before the Fed decision,” said Adam Sarhan, founder of New York’s Sarhan Capital.
The ECB, or European Central Bank, announced last week a potentially unlimited bond purchase plan to lower borrowing costs of debt-laden nations in the euro zone.
The Fed followed suit this week, pledging to buy $40 billion worth of mortgage debt a month until the U.S. jobs situation improves.
Copper and oil prices hit four-month highs on Friday, rallying with other markets that had languished for months on a dim global economic outlook, after the third round of U.S. quantitative easing, or QE3, announced by the Fed since the 2008 financial crisis.
Gold surged to a six-month high as investors rushed to hedge against the dollar’s tumble under the weight of the inflationary pressure expected from the stimulus. The Thomson Reuters-Jefferies CRB index, the 19-commodity bellwether, also scaled March highs.
Some analysts were doubtful whether those peaks in commodities could be sustained absent a recovery in real demand, especially in Europe and China.
“The Fed’s move is certainly bullish for commodities, but I don’t think we want to assume that the bullishness in commodities is as open-ended as the QE3 program itself,” said Vishnu Varathan, market economist at Mizuho Corporate Bank.
“The decisive thing is going to be a question of how things in the euro zone and China will pan out because if China’s demand doesn’t recover as quickly then a lot of this euphoria is going to fade.”
In actual contract terms, managed money positions in the 22 futures and options markets rose by 16,520 contracts in the week to September 11.
The notional outright value of net longs held by hedge funds and other speculators rose to $117.14 billion.
The notional figures are calculated by Reuters based on the change in net positions from a week ago, multiplied by the contract’s value at the end of the period. Because most investors trade commodities on margin, the change in the value of positions is not directly equivalent to total investment.
The total value of holdings is only a portion of the amount of investor capital estimated to be allocated to commodity markets worldwide, much of which is invested in over-the-counter contracts, physical exchange funds or credit notes, or via banks, which are classified differently by the CFTC.
(Editing by Jim Marshall)
URL: http://www.reuters.com/article/2012/09/14/us-hedgefunds-commodities-weekly-idUSBRE88D1O120120914