Palladium Futures (NYMEX) - COT Brief for week ending July 31, 2026

Executive summary

Speculative sentiment in Palladium remains overwhelmingly bearish, with Managed Money holding one of its largest net short positions in recent history. For the week ending July 31, 2026, their net short position stood at -6,173 contracts. This extreme bearishness from funds is starkly contrasted by the positioning of Commercials (Producer/Merchants), who maintained a rare net long position of +632 contracts, suggesting they see value at current price levels. The week's activity was characterized by modest short-covering from speculators, while Open Interest edged slightly higher to 18,699 contracts. The market is a coiled spring, pitting deeply entrenched speculative shorts against commercial value-buying, creating a significant risk of a short-squeeze on any bullish catalyst.

Positioning

• Managed Money (Speculators): Funds hold a massive net short position of -6,173 contracts (4,391 long vs 10,564 short). This is a slight reduction from the prior week's net short of -6,617 contracts but remains near the most bearish levels seen over the past year. Their gross short position alone accounts for a staggering 56.5% of the market's total open interest, highlighting a very crowded trade.
• Producer/Merchant (Commercials): Commercials are positioned net long by +632 contracts (1,779 long vs 1,147 short). This is highly unusual for this category, which typically holds a net short position to hedge physical production. This marks the fifth consecutive week they have been net long, a strong signal that physical market participants find current prices attractive.
• Swap Dealers: This category holds a significant net long position of +3,782 contracts (6,540 long vs 2,758 short). They are providing the primary liquidity for the large speculative short position.

Flows and week-over-week changes

• Managed Money: Speculators reduced their net short exposure by 444 contracts this week. The change was driven primarily by short-covering (shorts -19 contracts) and some new long additions (longs +425 contracts). This indicates a slight reduction in bearish conviction rather than a new bullish trend.
• Producer/Merchant: Commercials slightly reduced their net long stance, with a net change of -143 contracts for the week. This was a result of trimming longs (-45 contracts) while adding new shorts (+98 contracts).
• Swap Dealers: Swap dealers were net sellers of 144 contracts, reducing both their long (-236 contracts) and short (-92 contracts) positions.

Commercials vs speculators

The divergence in positioning between Commercials and Speculators is the most prominent feature of this market. - Speculators (Managed Money) are positioned for further price declines, with their gross short position (10,564 contracts) more than double their gross long position (4,391 contracts). - Commercials (Producer/Merchant) are positioned for price stability or appreciation, holding more long contracts than short. This "Commercial signal" often precedes market bottoms, as these participants are closest to the underlying physical supply and demand dynamics.

Open interest and participation

• Open Interest: Total open interest increased slightly by 259 contracts to 18,699. This is a modest recovery from the lows around 15,000 contracts seen in April but remains well below the levels above 22,000 contracts from late 2025.
• Concentration: The market remains highly concentrated on the short side. The largest eight traders hold a net short position equivalent to 40.6% of total open interest. This concentration in the hands of a few large players heightens the risk of a disorderly unwind.
• Participation: The total number of traders reported is 148, which is consistent with recent weeks. Managed Money shorts are particularly concentrated, with 36 traders holding the 10,564 short contracts.

Price context

The provided daily price series has some gaps but offers valuable context for the reporting period. - The CFTC data reflects positions held as of Tuesday, July 28th. - In the days leading up to the 28th, the price rose from 1253.0 (July 23) to 1269.5 (July 28). This price strength likely prompted the modest short-covering seen in the Managed Money category. - Following the "as of" date, prices weakened, falling to 1240.0 by July 29th and closing at 1244.5 on July 30th. - The broader trend since mid-June has been bearish, with prices falling from a high of 1366.0, which has rewarded the build-up of the large speculative short position.

Risks and watchpoints

• Short-Squeeze Risk: The primary risk is the extreme and crowded nature of the Managed Money short position. At 56.5% of total open interest, this positioning is vulnerable to a violent reversal on any unexpected positive news for Palladium (e.g., supply disruptions, better-than-expected auto sales).
• Commercial vs. Speculative Standoff: The conflict between net-long Commercials and net-short Speculators cannot persist indefinitely. A resolution will likely lead to a significant price move. The historical tendency is for the Commercial positioning to be the more prescient indicator.
• Flows to Watch: A continuation of short-covering by Managed Money could provide initial fuel for a rally. However, a sustainable bottom would require fresh long positions being established, which was not the dominant theme this week.
• Open Interest as a Confirmation Signal: Monitor open interest closely. A sharp rise in price accompanied by a significant increase in open interest would indicate new capital entering on the long side, confirming a potential trend reversal and adding pressure on existing shorts.