Commodity Blog

Commodity Prices – Gold

Copper prices jumped today as unexpected growth of pending home sales and improving labor market in the US suggest that demand for the industrial metal may increase. Pending home sales showed a growth by 5.2 percent in July instead of an expected decline. Claims for unemployment benefits fell from 478,000 to 472,000 last week. December futures for copper delivery rose $0.018 (0.5 percent) to $3.4955 per pound as of 13:17 on COMEX.

Gold rallied today on forecast that central banks around the world would keep interest rates at present levels. The European Central Bank decided today to keep the benchmark interest rate at the record low level of 1 percent. The Federal Reserve has kept the US benchmark rate near 0.25 percent since December 2008. December futures for gold delivery gained $5.30 (0.4 percent) to $1,253.40 by 13:46 COMEX.

Wheat prices hit the highest level in a week today on an outlook for reduced output from Argentina and Russia because of drought. Global inventories may decline 9.9 percent to 174.8 million metric tons. December futures for wheat delivery gained $0.215 (3.1 percent) to $7.165 per bushel as of 11:21 on CBoT. Concerns about adverse weather boosted wheat futures, causing them to rise 45 percent since the end of June.

Gold fluctuated today, but expected to resume its rally as faltering economic recovery and declining US equities increased demand for the metal as a safe haven. US stocks dropped after a government report showed that personal income rose less than predicted. The gross domestic product rose 1.6 percent in the second quarter of 2010, less than estimated in the previous month. December futures for gold delivery slid $0.5 to $1,237.40 per ounce by 11:25 on COMEX. Gold prices advanced 13 percent this year, touching the record level of $1,266.50 per ounce in June.

Gold reached a new high level since July 1st today as the investors continued to bet on the weaker global growth and bought save haven assets, including the bonds, some currencies and all the precious metals.

Gold takes a prominent position among the commodities — unlike crude oil (which is reacting quite badly to the latest recession signals), the gold futures are the major beneficiary of the ongoing market uncertainty. It’s rising for the second day in a row today, with the beginning of its latest uptrend wave being on July 28. Gold is a nice alternative to the bonds with more volatility and margin trading.

The commodity is going up along with the silver, palladium and platinum. We’ll continue to witness a strong positive correlation between the gold and the US treasuries in the future. Tom Pawlicki of MF Global Ltd. said about it:

Gold can continue to compete with Treasuries for investment as opportunity costs of holding gold are low due to falling interest rates.

Spot gold is now trading at $1,238.74 as of 17:29 GMT after closing at $1,229.92 yesterday. The historical maximum for the gold is located at $1,264.78.

Wheat prices fell today as Canada’s government report predicted that production would decline less than previously estimated. Canadian wheat output will decrease 15 percent, compared to previous estimates of a 17 percent decline. Wheat prices surged earlier after Russia banned exports because of worst drought in about half-a-century. December futures for wheat delivery slid $0.06 (0.8 percent) to $7.0825 per bushel as of 10:21 on CBoT.

Gold slipped together with other commodities today as signs slower global economic growth caused investors to sell commodities and equities. Stronger dollar also pushed gold prices lower. Reports this week increased concerns that US economy may experience double-dip recession. Next week can also bring news, as reports expected to show that sales of existing homes in the US decreased, growth of exports from Japan slowed and German business confidence weakened. December futures for gold delivery went down $7.10 (0.6 percent) to $1,228.30 per ounce by 11:19 COMEX.

Gold prices declined this summer, which can be expected, as summer is traditionally bad season for gold (among some other commodities). What’s important, prices fell from the all-time high, but remained on very high level historically. Despite recent declines, most traders remain very bullish on bullion, and this outlook proves correct (at least for now) as the precious metal resumed its climb to higher level.

The first reason to be bullish is seasonal demand. The period from September through December always was strong period for gold historically and we have no reason to believe this year to be an exception. There are many holidays, which are favorable for the precious metal, including Islamic Ramadan, at the conclusion of which many Muslims buy gold for good luck. Then, there is wedding season in India, historically biggest market for gold. Moving to the West we’ll have later the New Year and Christmas, and returning to the East the lunar New Year.

For longer term, trader can consider other factors (which actually influence prices in short term too). The obvious upward driving force is the concerns for the global economic recovery, caused by troubles in Europe and US. In the same time, Asia becomes more prosperous, especially China and India. Gold historically has great appeal for the people of these countries, not just for its aesthetic value but also as a safe haven for hard times. This means that they tend to hoard gold, but aren’t inclined to part with it easily. And the demand for gold will only grow as the citizens of India and China are becoming richer.

So, where gold is heading? Obviously, higher. For the short term, it may rise $100 or $200 higher before pausing its rally, but for the longer terms it has potential to rise much, much higher. Of course, some correction may be possible, but level of $950—$1050 should be level of support.

Gold dropped today from the highest price in six months after the stronger dollar decreased appeal of the precious metal as an alternative investment asset. The US currency gained as much as 0.2 percent versus the basket of six currencies today. Gold have tendency to move in an inverse pattern to the dollar. Gold also fell after some traders sold the metal to profit from high prices.

Gold prices previously surged on concerns about the global economic recovery. Outlook for the US economy is grim after dovish statement of the Federal Reserve this week, China’s economic expansion is slowing and Europe’s economy may be crippled by budget cuts. Actually, these concerns hadn’t gone away, so gold still has great potential. Considering increasing demand in Asia, especially in China and India, we can expand that bullion’s rally will continue.

December futures for gold delivery slid $2.30 (0.2 percent) to $1,214.40 as of 11:09 COMEX. Gold futures previously rose to $1,219.80, the highest price since July 1. The metal reached the record $1,266.50 level per ounce in June.

Concerns about the global recovery and the recovery in the US pushed gold prices higher today. A decision of the Federal Reserve to keep interest rates at record low levels and speculation that the US government would continue to print money to support economy increased concerns about sustainability of the US economic expansion and drove traders to seek safety, increasing appeal of gold. Previously gold declined as the dollar strengthened. December futures for gold delivery reached $1,207.60 per ounce by 15:12 on COMEX.

Some other commodities, particularly crude oil and copper, reacted much more negatively on pessimistic sentiment across markets. Demand for crude oil depends on the global economic health, and with grim outlook for recovery demand will likely wane. Copper prices were hit not only by news from US, but also but expectations of lower imports in China. Spot price for crude oil was $80.36 per barrel on NYMEX, while copper futures fell $0.0415 cents (1.2 percent) to $3.3125 per pound as of 13:28 on COMEX.

Judging from the chart’s structure and Japanese candlestick patterns, the author of this commodity forecast video offers his vision of the future of gold trading. The bottom formed last week was a pivotal point on the daily chart. It’s a lower low that’s usually followed by lower high. Traders may expect a top to form somewhere between $1,215.00 and $1,235.00, before the gold will be able to decline farther.

Gold futures rallied today to the highest level in a week as the rising stocks and commodities signaled about expanding global economic growth, causing speculations that demand for raw materials will rise. The MSCI World Index of stocks climbed to the highest level since May 13 and Reuters/Jefferies CRB Index of 19 commodities headed for the biggest rally in almost a year. Crude oil jumped above $81 per barrel, while copper surged to the highest level in three months. An outlook for a seasonal increase of demand in such countries as India and Turkey also supported gold prices.

Euro’s rally prompted investors to sell the precious metal and buy the 16-nation European currency, limiting gains of gold. As McGhee of Integrated Brokerage Services said:

On the rallies, you’ve got some investors moving out of gold and back into euros.

December futures for gold delivery advanced $1.50 (0.1 percent) to $1,185.40 by 13:35 on COMEX, following the surge to $1,193.90. Speculators raised net-long position by 5.9 percent on COMEX in the week ended July 27th.

Gold gained today on speculation that low prices would encourage investors to buy the precious metal. Most analysts say that the decline of prices is temporary and may end soon. It can be considered a good buying opportunity for long-term investors. December futures for gold delivery advanced $6.10 (0.5 percent) to $1,177.30 per ounce on COMEX.

Corn and soybean prices went up today as demand for supplies from the US grew after drought and high temperatures harmed crops from Germany to Russia. Grain output in Germany estimated to drop as much as 11 percent, from 49.6 million metric tons in 2009 to 44 million this year. Drought hurt crops across at least 10.3 million hectares (25.5 million acres) in Russia, causing the government to declare emergencies in 27 crop-producing regions. December futures for corn delivery went up $0.0775 (2 percent) to $4.015 per bushel on CBoT. November futures for soybean delivery rose $0.1175 (1.2 percent) to $9.9975 per bushel as of 10:32.