Commodity Blog

Posts Tagged ‘China’

Hogs futures gained today on speculation that prices declined too much last week, considering strong demand in the US. Exports of meat rose, also adding to demand. October futures for hog settlement rose $0.00275 (0.4 percent) to $0.7515 per pound by 13 on CME.

Soybean prices dropped today on speculation that demand in China and the US may slow after prices surged. November futures for soybean delivery slid $0.125 (1.2 percent) to $10.10 per bushel as of 13:15 on CBoT, the biggest drop since August 19th. December futures for soybean-oil delivery dropped $0.0048 (1.2 percent) to $40.05 per pound.

Corn slipped today as rains improved outlook for wheat output and on speculation that demand for ethanol would fall after oil prices declined. Speculators continue to bet on price increase, anyway. December futures for corn delivery fall $0.0225 (0.5 percent) to $4.3925 per bushel on CBoT.

Crude oil rose today as a rally of global stock markets improved confidence in sustainability of the global economic recovery, increasing demand for fuel. The S&P 500 rose 1.4 percent and the Dow Jones Industrial Average gained 1.2 percent. Oil also gained after the dollar dropped, increasing attractiveness of commodities as an alternative investment. September delivery for crude oil gained $1.16 (1.5 percent) to $76.40 per barrel by 11:23 on NYMEX.

Nickel prices fell on outlook that demand for stainless steel, the main source of consumption for the metal, would weaken. Demand from China, the largest consumer, will stay at 377,000 tons this year. Global nickel consumption will slow to 8.4 percent in this quarter, down by almost half from the previous quarter. Nickel spot price closed yesterday at $21,479 on LME. Prices may reach $17,030, the lowest level since February, before rebounding.

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.

Copper prices jumped today on speculation that the metal was oversold, considering declining inventories. Prices declined earlier as traders were concerned about slower economic growth in two most significant copper consumers: the US and China. The Federal Reserve said that the US economic growth would be “more modest”. China’s industrial production grew with the slowest pace in 11 months in July.

Worries are still present, but perhaps fears were overdone. LME-monitored inventories were decreasing for five consecutive months, the longest decrease since July 2007. As Matthew Zeman, a trader at LaSalle Futures Group, put it:

On a short-term basis, this market has been oversold. The lower inventory levels will help to keep a lid on things. The market will still be vulnerable if we continue to get more indications that growth is slowing.

September futures for copper delivery went up $0.037 (1.1 percent) to $3.3125 per pound by 11:25 COMEX. The price previously slipped 0.6 percent to $3.255, the lowest level since July 30.

Crude oil declined today for a second day on concerns that slower economic growth in China and the US will damp demand. Year-on-year industrial production expansion in China slowed to 13.4 percent in July, compared to the June growth of 13.7 percent. The report that US inventories of crude oil declined for a second week may support the prices. September delivery for crude oil slipped $1.35 (1.7 percent) to $78.90 per barrel as of 9:57 on NYMEX.

Copper prices also fell on concerns for the global economy. The metal prices slid after the Federal Reserve said that the US economic recovery would be “more modest” and as pace of China’s industrial output growth was slowest in 11 months. Copper also dropped as the dollar surged. September futures for copper delivery went down $0.0705 (2.1 percent) to $3.242 per pound as of 11:22 on COMEX.

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.

Soybeans gained today on speculation that US inventories will decline with increasing China’s imports. China bought 284,000 metric tons of US soybeans for delivery after September 1st, while Chinese processors may have purchased more than 1.2 million tons of soybeans from the US in the previous week. November futures for soybean delivery went up $0.0525 (0.5 percent) to $10.39 per bushel as of 10:12 on CBoT.

Cocoa slipped to the lowest level in three months in London on outlook for better harvest in Ivory Coast, the biggest grower in the world. The harvest starting next month may rise 11 percent to 1 million metric tons from 900,000 tons in the previous year. December delivery for cocoa gained $4 (0.1 percent) to $3,039 per ton by 12:03 on ICE.

Raw-sugar futures erased gains, sliding to the two-week low, on speculation that growing supplies from Brazil will curb the global deficit. Production in Brazil’s Center South, the largest producing region in the world, advanced 26 percent in the first half of July. October delivery for raw sugar fell 0.5 cent (2.7 percent) to $0.1774 per pound as of 13:10 on ICE.

Copper fell today after US non-farm payrolls decreased more than expected, suggesting that the economic recovery in the US is fragile and demand for the metal may wane. US non-farm payrolls dropped by 131,000, compared to the forecast 63,000 decrease. Unemployment rate remained stable at 9.5 percent.

Reports about employment, together with previous bad news from US, makes one think that nation’s economy is far from being stable. That’s bad for copper as the US is the second largest consumer of the industrious metal in the world. China, the biggest copper user, is also experiencing slowdown of economic growth.

September futures for copper delivery slid $0.0125 (0.4 percent) to $3.341 per pound by 11:44 on COMEX. The price touched $3.4105, the highest level in three months, on August 4th and declined 1.5 percent yesterday. Analysts say that the metal may fell to $3.00.

Copper dropped today from its record prices on speculation that demand for the metal would wane as house prices in China will tumble. Chinese government was concerned after house prices jumped 68 percent in the first quarter that soaring prices would create bubble that sooner or later burst, crippling the nation’s economy. The government was already attempting to cool the overheated economy and bring prices down. Now Chinese banking regulators are going to perform stress tests on banks to discover how they would fare in case of a 60% slump of Chinese house prices. Housing market has great influence on copper prices as construction makes up a quarter of copper demand.

Frank McGhee, the head dealer at Integrated Brokerage Services LLC, thinks that “if China wants to signal a slowdown, then the copper rally may have run its course”. Another analyst said that that it’ll be good if annual growth of Chinese demand would be limited by 8 percent.

September futures for copper delivery slid $0.0480 (1.4 percent) to $3.3565 per pound by 11:21 on COMEX. Yesterday, price reached $3.4105, the highest level since April 29th. Delivery for copper in three months dropped $94.50 (1.3 percent) to $7,410.50 per metric ton on LME.