Gold speculators used the sell-off as an opportunity to increase length

"After reaching a low of $1,160/oz, gold specs used the sell-off as an opportunity to increase length, adding more long positions in comparison to shorts," TD Securities analysts note.

Key quotes

"With the US dollar off the highs, along with stability in China and other emerging markets supporting prices, investors were convinced to reduce their net short exposure to the yellow metal. Furthermore, it is likely shorts started to cover as gold broke back above $1,200/oz to end the week amid Powell's Jackson Hole speech, which mentioned that the Fed is not seeing any signs of inflation overheating."

"Copper specs flipped to a net short position this week after another reduction in longs outweighed short covering. But, it is likely traders have called a bottom in the red metal after last week's capitulation, as low level talks between the US and China kicked off and emerging markets stabilized. In addition to risk sentiment, fundamentals have also been tightening as inventories draw in both LME and SHFE warehouses, with inventories in China falling nearly 50% since July. Given the elevated short positioning, any progress towards a trade deal could very well send copper materially higher as the year comes to an end."

"WTI crude specs decrease positioning after getting caught up in the risk-off markets last week. Length should return though, as prices bounced off the 200dma support of $64.39/bbl, attracting technical buying, while macro funds also regained appetite as trade tensions eased and a combination of global supply risks and tightening inventories suggested prices were too low. Our proprietary CTA position estimates also signaled that upward momentum generated from the shifting sentiment attracted additional trend following length. We expect crude to remain supported near the upper bound as tighter fundamentals and low spare capacity keep investors interested."

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