Palladium COT Report for 2026-09-18

Executive summary

Speculative sentiment in Palladium futures has turned aggressively bearish, with Managed Money increasing their net short position significantly this week to levels approaching the multi-month extremes seen in late July. This large bearish flow was primarily absorbed by Swap Dealers and Other Reportables, who expanded their net long positions. Commercials (Producers/Merchants) also modestly increased their own net short positions, aligning with the speculative consensus. Overall market participation, as measured by open interest, remains subdued and near the lower end of its year-to-date range. The last time speculative shorting reached similar extremes, it preceded a sharp price rally, presenting a key contrarian risk to the current bearish outlook.

Positioning

• Managed Money: This speculative cohort holds a deeply pessimistic view, with a net short position of -5,688 contracts. This is one of the largest net short positions in the provided historical data, nearing the extreme of -6,617 contracts recorded on July 24, 2026. The position is comprised of 4,273 long contracts versus a substantial 9,961 short contracts.
• Swap Dealers: Acting as the primary counterparty, Swap Dealers are heavily positioned on the other side with a net long of +3,733 contracts. This is a significant long holding, although slightly below the recent peak of +4,158 contracts from late August.
• Producers/Merchants: Commercial hedgers hold a net short position of -655 contracts. This is a relatively light short position for this group compared to levels exceeding -3,000 contracts earlier in the year, indicating more modest hedging activity.

Flows and week-over-week changes

• The most significant flow this week came from Managed Money, who added 1,349 contracts to their net short position. This was a combination of liquidating longs (-566 contracts) and establishing new shorts (+783 contracts), indicating a strong conviction in lower prices.
• Swap Dealers absorbed a portion of this selling, increasing their net long position by 464 contracts.
• Other Reportables also showed a strong offsetting flow, adding 911 contracts to their net long stance.
• Producers/Merchants tilted more bearish alongside speculators, increasing their net short position by 218 contracts.
• Total Open Interest was nearly unchanged, falling by a negligible 66 contracts. This suggests the week's activity was primarily a transfer of positions between participants rather than a significant inflow or outflow of capital from the market.

Commercials vs speculators

The market shows a classic divergence between key players. Speculators (Managed Money) are positioned for a significant price decline, while financial intermediaries (Swap Dealers) are taking the opposite side, facilitating this view with a large net long position. Unusually, the traditional commercial hedgers (Producers/Merchants) are directionally aligned with speculators, both holding net short positions. This alignment can sometimes signal a strong trend, but given the extreme level of speculative shorts, it also points to a very crowded trade.

Open interest and participation

• Total open interest stands at 16,707 contracts. This is on the low end of the range seen over the past nine months, which peaked above 22,000 contracts in late 2025. The reduced participation can sometimes lead to heightened volatility on new market flows.
• The market shows a notable degree of concentration on the short side. The largest four traders hold 30.5% of the net short position, and the largest eight hold 47.1%. Such concentration can amplify moves during a potential short-squeeze.

Price context

While daily price data for the most recent reporting week is sparse, the broader trend provides important context. Palladium prices peaked at 1423.5 on August 28 and have since pulled back, with the latest available closing price at 1291.5 on September 18. The aggressive build-up of speculative shorts has occurred during this price decline. It is crucial to note that the last period of extreme speculative shorting in late July, when the Managed Money net position hit its low for the year, coincided with a price bottom around 1246.0. That low was followed by a rally of nearly 15% over the subsequent month.

Risks and watchpoints

• Crowded Short Trade: The primary watchpoint is the extreme net short positioning by Managed Money. This makes the market highly susceptible to a short-covering rally if a bullish catalyst were to emerge, as seen following the similar positioning setup in July.
• Producer Hedging: Producers are currently lightly hedged on the short side relative to historical levels. Any increase in their buying activity to reduce hedges could add upward pressure on prices.
• Swap Dealer Capacity: The large net long held by Swap Dealers is key to facilitating the speculative short view. Any signs that this group is reducing its long exposure could signal a turn in the market dynamic.
• Low Liquidity: The subdued open interest environment means that any large new orders could have an outsized impact on price, increasing the risk of sharp, sudden moves.