Wall Street is the most bullish on commodities in a decade

Photographer: Daniel Acker / Bloomberg

Commodity investors are back in full force, with record holders that crops, metals and oil are set to rally.

A weakening dollar makes commodity-denominated currencies more attractive at a time when rations are in tears and the world is on track to overcome coronavirus pandemic. All of this has prompted speculators to return to commodity markets, building a collective bet on prices rising to their highest level in at least a decade.

That is a very strong turnaround for a corner of the financial market that has been struggling to attract investors since the China-led massacres earlier this century. The background looks familiar: The Asian powerhouse is on a buying spree again and investors are looking for other places to deposit the money while central banks try to to promote economies.

“Products have climbed successfully right now,” said Michel Salden, head of products at Vontobel Asset Management. “Markets are converging due to the impact of the U.S. dollar weakness, recovery from Covid-19, central bank incentives, and increased fiscal spending on infrastructure.”

Investors are so bullish that they were holding a full-time position, or the difference between a bet on rising prices and wagers falling, of 2.3 million futures and options contracts in the week ended. Jan. 5, according to data compiled by Bloomberg. That ‘s the biggest since at least January 2011.

The enumeration includes 19 of the 22 raw materials in the Bloomberg Product Index. They exclude aluminum, zinc and nickel, which are reported by the London Metal Exchange on a different basis.

Money managers ’bullish bet on corn is at its highest level in nearly 10 years. China is loading up on American crops, already having the highest share of grain, while soybean purchases are running at the fastest pace since 1991. Sugar has also caught the attention of investors, with Alvean, the world’s largest retailer of confectionery, predicting two years of shortages ahead.

“Even grains, which had been on their way down since 2012, have accumulated more than 45% over the past six months due to La Nina-related drought in Latin America,” Salden said. It also built on China’s role in acquiring strategic resources of goods.

Oil, recovering from an unprecedented catastrophe triggered by the pandemic, has risen to record highs 10 months after Saudi Arabia’s surprise decision to cut unilateral production with 1 million barrels per day for February and March.

The rally has also expanded above major crude prices and into options and strength signals at both ends of the oil futures curve. Speculators pushed a bullish bet on Brent to an 11-month high, while full-time positions in gasoline rose to a 10-month high.

“Crude oil looks set to play a key role in the reopening of the economy, rising demand and building confidence around the vaccine,” said Phil Streible, chief executive. market strategy at Blue Line Futures LLC in Chicago. “Saudi Arabia shook violently back try to support prices. ”

Bet on gold prices rose to a 16-week high, and platinum nets are at their highest level since February. Investors also bet on long-line positions bet on cash for the fifth week in six.

– Supported by Gerson Freitas Jr., Michael Hirtzer, Joseph Richter, and Naureen S Malik