Palladium Futures COT Brief: August 28, 2026

This report analyzes futures positioning data for Palladium (PA) on the New York Mercantile Exchange for the week ending Tuesday, August 25, 2026.

Executive summary

• Speculators Intensify Bearish Bets: Managed Money (speculative funds) significantly increased their net short position, adding to an already crowded bearish trade despite a price rally during the reporting week.
• Commercials Align with Bears: Producer/Merchants also became more bearish, increasing their net short exposure, albeit from a much lower base. This alignment of speculators and hedgers against the recent price rally is a notable signal of bearish conviction.
• Swap Dealers Absorb Selling: Swap Dealers were the primary buyers, increasing their substantial net long position and providing liquidity for the sellers.
• Short Squeeze Risk Heightens: Open interest declined as positions were re-shuffled. The combination of extreme speculative short positioning and a sharp price rally immediately following the data's cut-off date (Aug 26-28) points to a significant risk of a short-covering squeeze.

Positioning

• Managed Money (Speculators): The net short position held by speculative funds expanded to -5,499 contracts. This is a deeply bearish stance and approaches the multi-month extremes seen in late July (e.g., -6,617 contracts on July 24).
• Producer/Merchant (Commercials): Commercials increased their net short position to -423 contracts from -236 contracts the prior week. While more bearish on the week, this is still a historically light short position compared to levels near -4,000 contracts at the beginning of the year.
• Swap Dealers: This group reinforced its role as the market's principal long, increasing their net long position to +4,158 contracts. They are the primary counterparty to the speculative shorts.

Flows and week-over-week changes

The reporting week saw participants actively selling into price strength. - Managed Money was a net seller of 182 contracts. This was the result of adding both new longs (+454 contracts) and a larger number of new shorts (+636 contracts). - Producer/Merchants were net sellers of 187 contracts. They liquidated both long (-535 contracts) and short (-348 contracts) positions, but the faster liquidation of longs resulted in a more bearish net stance. - Swap Dealers were the largest net buyers, adding 324 contracts to their net long position, primarily by covering short positions (-317 contracts). - Non-Reportable (small retail) traders were also net buyers, increasing their net long by 289 contracts.

Commercials vs speculators

A rare alignment occurred this week, with both major speculative and commercial players increasing their net short exposure. - Managed Money is the dominant force on the short side, with their gross short position of 9,985 contracts accounting for a massive 57.1% of the market's total short-side open interest. - Producer/Merchants are taking a more cautious bearish stance. Their net position of -423 contracts is minor compared to the speculative position, suggesting commercial hedging activity is relatively subdued. - The primary market dynamic is a conflict between highly bearish Managed Money and heavily long Swap Dealers.

Open interest and participation

• Open Interest: Total open interest declined by 870 contracts to 17,496. A drop in participation during a week of rising prices suggests some market participants were closing out positions and taking profits or cutting losses rather than establishing new conviction.
• Concentration: The market shows significant concentration on the short side. The largest four traders hold a net short position equivalent to 32.4% of open interest, and the top eight hold 46.1%. This concentration makes the market more susceptible to a short squeeze if a catalyst emerges.

Price context

• The positioning data covers the trading week up to Tuesday, August 25. During this period, front-month Palladium futures (PA) rallied from a close of $1,289.0 on August 18 to $1,336.5 on August 25.
• Speculators and commercials alike used this rally to increase their short exposure, effectively "fading" the move higher.
• Crucially, in the days immediately following the data's cut-off, prices surged dramatically, closing the week at $1,429.0 on Friday, August 28. This powerful move likely put significant pressure on the large number of fresh short positions established during the reporting week.

Risks and watchpoints

• Short Squeeze Potential: The primary risk is a continuation of the rally driven by forced short-covering. The extreme and concentrated net short position held by Managed Money, combined with the strong price surge after the reporting date, creates a classic setup for a short squeeze.
• Bearish Conviction Test: The willingness of major players to sell into the rally will be tested. If they view the late-week price surge as an anomaly, they may add to shorts. However, sustained strength could force a major unwind of their bearish bets.
• Swap Dealer Activity: Swap Dealers' capacity to continue absorbing speculative selling is a key watchpoint. If they begin to unwind their large +4,158 contract net long position, it would remove a major source of support for the market.