Commodity Blog

Posts Tagged ‘Asia’

The slump of silver in September left traders wondering if the precious metal lost all bullishness that was so apparent at the beginning of the year. It’s truth that the metal shows a tremendous volatility, yet bulls haven’t lost all hopes yet.

The credit problems in Europe can potentially increase demand for silver as a precious metal. The recovery in the US also isn’t certain. The attempts of central banks across the world to weaken currencies of their nations made commodities, and precious metal in particular, preferred assets for safer investment.

The role of silver as an industrial metal also isn’t forgotten. While the economic problems in the Western nations may prove negative for the metal, the robust economic growth in Asia provides a strong demand. China, the biggest consumer of the white metal among emerging markets, shows especially strong growth. The growth slowed somewhat at present, but that’s not completely bad as a slower rate of expansion decreases probability of a government’s intervention to cool the overheating economy.

Spot price for silver was at $30.73 per ounce today as of 3:35 GMT on COMEX, following the drop from $32.05 to $31.22 yesterday. The price slumped from $39.80 to $30.56 in the huger four-day drop in September. After the decline the price stabilized near $31.85.

Sugar prices fell to the lowest level since September as specialists forecast that exports from Thailand, second biggest shipper in the world, will increase. Cocoa and coffee also fell.

Thailand may export 7 million metric tons of sugar this season, and that would be a record. Analysts are afraid that surge of exports can create oversupply on the global markets.

At the same time, demand for the sweetener may decline as Asian countries are expected to slow their economic growth. India and Brazil signaled that they are considering another round of interest rate increases, while China continues its attempts to rein the rapidly growing inflation.

July for raw sugar delivery fell as much as $0.007 (3.2 percent) to $0.2135 per pound by 14:00 on ICE, following the drop to $0.2133, the lowest price since Sept. 10. Futures on raw sugar lost 34 percent this year.

July contract for cocoa delivery slipped $60 (1.8 percent) to $3,211 per metric ton at 11:58. Futures on Arabica coffee for delivery in July dropped $0.1165 (3.8 percent) to $2.945 per pound.

Gold showed an impressive rally in 2010, but by the end of the year the precious metal experienced several drops, causing concerns that the rally is faltering. Is this just a temporary breather before another jump to records or gold started a way down?

The fundamentals as well as the sentiment look favorable for the metal. The experts from the International Business Times and the Mineweb name such favorable factors for gold: the quantitative easing of the Federal Reserve, the debt crisis in Europe, which forces the European Central Bank stimulate the economy of the European Union, general debasing of currencies by governments of different countries and worldwide uncertainty about global recovery – all this makes gold a very attractive asset to hold as a safe haven. As more and more investors flock to gold new problem arises: the lack of supplies. The old mines are drying out and the new ones aren’t going to be opened in sufficient quantities as there are no resources and technologies to quickly find the new gold deposits. And a growing demand from Asian countries, primarily from India and China, puts additional strain of dwindling supplies.

Despite all the favorable factors gold’s rally stalled recently. One of the reasons for weaker performance of the precious metal was a stronger dollar. The fact that gold is priced in dollars on markets and the recent rally of the greenback held gold prices from going much higher. Another reason for gold possibly being weaker is its current high price, which may drive investors away. Bears, as said on the Economist, also point out that the economic situation in the world should stabilize and the gold bubble will burst as the demand for the metal is mainly speculative and there isn’t nearly enough physical demand to justify such “outrageous” prices. Besides, there’s just no profit in keeping the metal as it’s not bringing interest, dividend, rent or some other form of income by itself like some other assets. On the contrary, safekeeping of gold incurs additional costs.

So, if you’re expecting improvement of the global economy you can start selling gold. But most economists wouldn’t approve such course of action. While such forecast as gold climbing to $5,000 aren’t widespread nowadays, more moderate forecasts, as outlined on the Morgan Gold, still promise gold to advance to $1,500 in the first half of the next year and rise to $2,000 by the end of 2011. Of course, corrections may be expected, especially if the interest rates would start rising, making other types of assets more attractive. Gold prices through the year may decline to $1,315 or even as low as $1,265.

Gold gained today in New York after the prices touched the lowest level in almost three months, boosting appeal of the precious metal. Some economists say that glorious days of gold are over and it’ll be long time before we’ll see another surge of the prices. Other experts insist that the current decline is short-term and the prices will rally again in a month or two. In the latter case, the current low prices may be considered as buying opportunity.

The main supportive factor for gold prices is demand in Asia, particularly in China and India, which grew after prices fell. There are some religious holidays in India by the end of August, which may possibly fuel demand for gold jewelry.

December futures for gold delivery gained $1.80 (0.2 percent) to $1,163.60 by 11:05 on COMEX. Futures dropped yesterday as low as $1,160.80 per ounce, the most in more than three weeks, as a rally in global stocks damped demand for gold as an alternative investment.

Gold gained as a speculation that Greece won’t receive an aid soon spurred a demand for the precious metal as an alternative to traditional currencies. Gold priced in the euro and the Swiss franc reached records, while the precious metal priced in pound jumped to almost all-time highest level. The dollar’s 4.9 percent rally against a basket of six major currencies this year hadn’t significant impact on a gold price, supporting the viewpoint that gold can be considered yet another currency. The weak dollar still benefits the metal, yet the strong one isn’t necessary hurt it anymore.

An increasing investors’ demand boosted sales of old jewelry and other scrap gold. Asia still provides steady consumer base for a physical selling.

Analysts say that gold needs to noticeably jump above the old highs to continue its rally. The metal must rise above the $1,160 level of previous resistance to attract more investors.

June futures for gold delivery in gained $6.90 (0.6 percent) to $1,160.90 per ounce by 10:49 on the Comex in New York. Highest level of $1,170.70 for gold prices in the year was reached on April 12th. Futures reached their all-time high level of $1,227.50 on December 3rd.

Copper advanced on speculation that the demand for metals will increase as the global economic recovery expanding. The demand surge mainly originates from Asia, particularly China. The Japan’s shipments of wire and cable, made from copper, rose 13 percent in March from the previous year. July futures for copper delivery advanced $0.0175 (0.5 percent) to $3.5355 per pound on NYMEX.

Sugar futures dropped on the outlook for the recovering output in India, the largest consumer and second-biggest producer in the world. Previously sugar rose as the falling production of the sweetener in India resulted in the global deficit, but now the sugar production predicted to rise 24 percent to 23 million metric tons in the season starting October 1st. Analysts say that sugar will trade in a range $0.15-$0.18, yet in a worse case the price may drop to $0.13. July delivery for raw sugar dropped $0.0045 (2.6 percent) to $0.166 per pound on ICE Futures U.S. in New York.

Crude oil fluctuated as the dollar fell, bolstering the demand for commodities as an alternative investment, and after a government report that the U.S. economy expanded less than predicted in the fourth quarter of 2009. The U.S. currency fell as much as 1.1 percent versus the euro. OPEC is planning to raise shipments by 1.7 percent in the month ending April 10th, signaling that demand in Asia stays high. May delivery for crude oil fell $0.14 to $80.39 per barrel as of 10:26 on NYMEX.

Hog futures slid on outlook for lower reductions of the U.S. breeding herd. U.S. hog farmers held back about 5.855 million sows for breeding by March 1st, that’s 2.3 percent down from a previous year. Reductions declined as farmers expect that profits may rebound after losses on slumping pork demand and high corn prices. June futures for hog settlement slid $0.00175 (0.2 percent) to $0.7945 per pound by 11:44 on the Chicago Mercantile Exchange.

Aluminum producers lowered the fee for Japanese buyers after China resumed halted capacity and supply in Asia rose as smelters began production. Premiums for the three months ending June 30 fell to $122 per metric ton down from $125 to $130 this quarter (the highest level in 14 years). The premium for Good Western-grade aluminum ingot more than doubled in 2009 as record purchases by China and decreased supplies from Russia caused shortage of the metal in Asia.

China, the largest buyer of copper in the world, decreased import after record purchases in 2009 as local smelters restarted production. Aluminum smelters in China, the largest producer of the industrial metal, resumed 5 million tons per annum of idled capacity in past year as profit margins improved with increasing prices. China’s purchases of refined aluminum dropped to 40,059 metric tons in January from 42,106 tons in December as the nation have ample inventories after it have bought more metal than necessary on outlook for a demand recovery.

Delivery for aluminum in three months rose 0.3 percent to $2,225 per ton by 15:57 on the London Metal Exchange. The price has reached previously a 15-month high.

Cocoa rose to a highest level in 21 years in London on speculation that demand will be boosted by a rebounding global economic. Restocking is taking place as consumer confidence returns and business conditions improve. Cocoa consumption jumped 0.6 percent in Europe in the fourth quarter. March delivery for cocoa rose 1 percent to $3,770 per metric ton on Liffe today.

Copper prices tumbled to the four-week low as the rising dollar cut buying of commodities as an inflation hedge and a decline in equity markets curbed demand outlook. Yet some analysts think that the outlook for copper over the longer term is quite positive as demand rises in Asia, including China. March futures for copper delivery dropped $0.06 (1.8 percent) to $3.295 per pound on NYMEX.

Soybeans rose on expectations that demand from China will rebound after prices from the U.S. fell 9.4 percent this month. China’s demand for soybeans grown in the U.S. to produce cooking oil and livestock feed rose as drought harmed crops in South America last year. March futures for soybean delivery gained $0.04 (0.4 percent) to $9.54 per bushel on CBoT.

Consumption of aluminum may continue to rise in Asia next year as stimulus measures in China, the greatest consumer of the metal in the world, and rest of the region increased demand for the metal. China’s economy growth touched 8.9 percent in the third quarter, being the fastest in a year. Aluminum prices rose 32 percent in China this year. Analysts predict that demand will exceed supply by 380,000 tons next year and prices will average $2,700.

Cotton gained for the fifth straight session as high prices for cotton in Chinese markets boosted the attractiveness of cotton. Unwillingness of cotton holders to deliver supplies against December contracts also helped cotton prices. March futures for cotton delivery gained $0.0058 (0.8 percent) to $0.7506 per pound by 12:44 on ICE Futures U.S. in New York.