Commodity Blog

Posts Tagged ‘hedge funds’

The spot gold and the August gold futures dropped today to the lowest level since May 24 as the speculators and big hedge funds no longer see a huge potential for this commodity. While the natural demand for gold may remain unchanged, the investment demand for it is going down as some other investment vehicles provide better opportunities for short-term gains.

The net-long speculative positions for gold on COMEX fell by 4,121 during the week ending July 13 according to CFTC‘s Commitments of Traders report. Speculative long positions still outnumber the short ones by 204,921. But the number is currently at its lowest level since April 6, signaling a possible further drop in gold.

Some commodity analysts say that since there is no strong fundamental demand for gold, it will be going down fast if investors stop increasing their long positions on futures contracts. There simply isn’t enough buyers to sustain the current level of prices. It looks like traders were too “longish” in their expectations and the price direction may remain bearish until the end of the week. But if the gold manages to close below the 100-day exponential moving average (which is currently at $1,183.74) it can enter a rather lasting downward wave.

Spot gold is currently trading at $1,181.31 as of 17:28 GMT, falling from $1,194.36. It has reached $1,177.31 during the day — the lowest level in eight weeks.

Corn futures gained for a second day on the prospect for a slower price decline as the crop planting by the U.S. farmers has started. Some funds may start buying back short positions as traders hold selling, waiting for the Midwest farmers to begin planting. May futures for corn delivery rose $0.0075 (0.2 percent) to $3.465 per bushel on the Chicago Board of Trade.

Soybeans advanced on the outlook for the global economic recovery to spur the demand for the oilseed, used in the production of food and animal feed. The improving situation on the U.S. job market, as well the expanding economies in such countries as India and China, signals about the end of the global economic recession. May futures for soybean delivery added $0.085 (0.9 percent) to $9.445 per bushel on CBoT.

Wheat prices jumped to the highest level in almost five weeks after some hedge funds and speculators unwound bets on a price decline. Speculative short positions more than doubled in the first quarter of this year. Analysts say that market is nearly record short and any bullish news may shoot the market higher. July futures for wheat delivery climbed $0.10 (2.1 percent) to $4.7725 per bushel on CBoT.

Wheat prices went up as some traders are planning to unwind bets on falling prices. Government report said that hedge-fund managers and other large speculators increased their net-short positions by as much as 17 percent in the week ended on March 16th. May futures for wheat delivery went up $0.0575 (1.2 percent) to $4.895 per bushel as of 10:21 on CBoT.

Cocoa futures gained as U.K. pound, used to trade cocoa in London, rose, boosting the attractiveness of contracts traded in New York. Earlier the commodity slid on speculation about increasing production in Ivory Coast. Some analysts think that, without the support of the strong pound or threat of adverse weather in Ivory Coast, cocoa may drop to $2,650 this week. May futures for cocoa delivery gained $25 (0.9 percent) to $2,859 per metric ton by 11:51 on ICE Futures U.S. in New York.

Cotton futures advanced in New York on concern that farmers in the U.S. won’t plant enough this year to meet demand. Analysts say that prices are not high enough to encourage more plating. May delivery for cotton advanced $0.0055 (0.7 percent) to $0.8273 per pound at 12:19 on ICE.

Oil gained after forecast about winter storms in the U.S. this week. The National Weather Service is predicting that temperatures will be below average for the next 6–10 days. According to weather forecast Washington temperatures will be 10 degrees Fahrenheit (12 degrees Celsius) below normal as of February 14th, while New York will be 8 degrees below average by February 13th.

U.S. inventories of distillate fuel, including heating oil and diesel, decreased last week after temperatures fell. OPEC governor stated today that global oil supplies are enough to satisfy demand for the first half of 2010.

March delivery for crude oil advanced $0.73 cents (1 percent) to $71.92 per barrel by 11:58 on the New York Mercantile Exchange. March delivery for heating oil rose $0.016 (0.9 percent) to $1.8908 per gallon. March settlement for Brent crude gained $0.61 (0.9 percent) to $70.20 per barrel on ICE. Hedge-funds and other large speculators reduced bets on increasing oil prices for a third week.

Wheat dropped to the weekly low on expectation that U.S. President’s plan to limit risk-taking by banks will cut investment in commodities, including U.S. grain. Barack Obama may announce further details of his plan to restrict proprietary trading or investing in hedge funds and private-equity funds. March futures for wheat delivery decreased $0.045 (1 percent) to $4.8925 per bushel as of 10:08 on CBoT.

Crude oil and gasoline tumbled to the lowest level in five weeks after the report that stockpiles of the motor fuel climbed to a 22-month high. Demand for fuel fell 2 percent compared to the previous year in the four weeks ended January 22nd. Gasoline consumption dropped 0.4 percent from the previous week. Refineries worked at 78.5 percent of capacity. March delivery for crude oil slid $1.05 (1.4 percent) to $73.66 per barrel by the 14:30 on the New York Mercantile Exchange.

Copper gained in New York and London after imports of the industrial metal into China rose for a second month and the dollar fell. Shipments of copper into China increased to 369,400 tons in December. March futures for copper delivery gained $0.0405 (1.2 percent) to $3.441 per pound on the Comex division of the New York Mercantile Exchange. Delivery for copper in three months rose $106.50 (1.4 percent) to $7,567.50 a ton ($3.43 a pound) on LME.

Corn futures slid and soybeans declined on speculation that demand for supplies from the U.S. will decline as rains will increase crop yields in Argentina and Brazil. Rainfall will aid crops in Brazil in the next 10 days and will increase soil moisture for developing corn and soybeans in the next two days in Argentina. March futures for corn delivery declined $0.005 to $4.225 per bushel on the Chicago Board of Trade. March futures for soybean delivery slid $0.115 (1.1 percent) to $10.105 per bushel in Chicago.

Sugar tumbled to the lowest in nine weeks after speculators increased sales as prices last week reached the record in almost 29 years. Hedge-fund managers and other speculators boosted net-long positions by 25 percent in the last six weeks. March futures for raw-sugar delivery dropped $0.0078 (2.8 percent) to $0.2675 per pound on ICE.

Sugar futures gained for the third time in four sessions as traders increased buying to profit from growing supply deficit. Speculators were interested mostly in remaining in the long positions. Unfavorable weather conditions cut crops in Brazil and India increasing a global deficit. March futures for raw-sugar delivery increased $0.0046 (1.7 percent) to $0.2723 per pound as of 9:57 on ICE.

Orange-juice prices dropped to the week low after report that citrus harvest won’t be damaged by a cold weather. Possibility for some frosts remains but citrus harvest will be mostly untouched by a harsh weather. Orange-juice previously rose as hedge funds and other speculators were buying on concern that frosts will harm the fruits. March futures for orange-juice delivery fell $0.0275 (2 percent) to $1.379 per pound by 12:06 on ICE Futures U.S. in New York.

Coffee prices touched the lowest level this month as the dollar rebounded, erasing the attractiveness of commodities as a hedge against inflation. The dollar rose for a second day versus a basket of six major currencies, rebounding from a 15-month low. The price advanced 21 percent this year, before today, because of low supplies from Brazil, Colombia and Central America. March futures for Arabica-coffee delivery slumped $0.005 (0.4 percent) to $1.353 per pound as of 10:16 on ICE.

Wheat advanced, erasing previous losses, as demand rises amongst hedge funds and other investors for the futures as an inflation hedge. Need for food ingredients don’t fall much during inflation periods, thus making wheat quite a safe investment. Speculation suggests that wheat will fare better than other investments as the dollar declines. December futures for wheat delivery advance $0.0475 (0.9 percent) to $5.5675 per bushel by 11:40 on the Chicago Board of Trade.