Traders Go Long on Gold, Crude to Start the New Year

The major U.S. stock indexes closed out 2017 with impressive gains, with the Dow Jones Industrial Average (DJI) notching 71 record closes for the first time ever, and the S&P 500 Index (SPX) stringing together its longest monthly win streak in 30 years. And while stocks took a breather in the last week of trading, market players adjusted their trading positions for the new year, based on the U.S. Commodity Futures Trading Commission's (CFTC) latest Commitment of Traders (COT) report.

Traders Take a Shine to Gold as 2018 Kicks Off

After a large liquidation by large speculators in the first half of December, traders modestly increased their exposure to the gold contract last week. Gold gained 14% in 2017, and has continued this positive price action into the new year. At last check, February-dated gold futures were 0.2% higher at $1,320.60 an ounce -- up 0.9% year-to-date, and on track for a 10th straight up day.

Long Crude Position at Record High to Start New Year

Crude oil prices ended 2017 at their highest level since June 2015, tacking on 12.5% over the course of the calendar year and surging 17% in the fourth quarter alone. This week, February-dated crude futures have added 2.3% to trade at $61.81 per barrel.

Large speculators modestly increased their positions on crude last week to 679,047. However, this represents the largest long position ever on the crude contract, according to Schaeffer's Quantitative Analyst Chris Prybal.

Large Speculators Stay Long on Dollar

After being net short on the U.S. dollar for almost the whole late-July through mid-December period, large speculators went long on the currency in the week ending Dec. 19. This net long position dipped slightly in the final week of 2017, even as the greenback cooled. In fact, the U.S. Dollar Index (DXY) closed lower each day last week, and is currently on pace to notch its sixth loss in seven sessions -- down 0.3% at $91.86.

VIX Futures Shorts Start to Cover

Although the CBOE Volatility Index (VIX) plunged 21.4% in 2017, the market's "fear gauge" jumped 16.1% in the fourth quarter. VIX futures traders maintained an extreme net short position for the entirety of the three-month period. These large speculators began covering in the final week of the year, when, according to Prybal, the net short position on VIX futures fell below 100,000 for the first time since April 25.