Commodity Blog

Posts Tagged ‘interest rates’

Crude oil and gold, as well as other commodities, jumped after the Federal Reserve maintained interest rates near zero and pledged to keep borrowing costs record low at least till late 2014. Such move was considered a ”light” version of quantitative easing. It weakened the dollar and boosted commodities priced in the US currency. March for delivery of crude oil advanced $0.66 to $100.06 per barrel on NYMEX. Brent went higher from $110.45 to $110.74 per barrel on ICE today as of 6:41 GMT. Gold was up from $1,666.50 to $1,711.00 yesterday and traded at $1,710.80 today on COMEX.

Wheat was also higher on dwindling Russian stocks. Inventories of some Russian regions declined by more than 50 percent, while other regions shipped almost all of their supplies as exports picked up. Wheat climbed from $6.4075 to $6.4650 per bushel on CBoT today.

Commodities gained today as Greece rejected the planned referendum and the European Central Bank lowered its key interest rate. Crude oil and wheat were among the gainers.

The referendum, promised by Greek Prime Minister George Papandreou, threatened the stability of the Eurozone. Some of the European leaders even spoke about expelling Greece from the European Union. Now tensions receded, reinvigorating markets.

Economists expected the ECB to keep the interest rates unchanged today. Many market participants were concerned that the rates are too high for the strained economy of the EU. The central bank, lead by its new President Mario Draghi, surprised everyone by cutting the main minimum bid rate by 25 basis points to 1.25 percent.

Wheat was down yesterday as the record harvest boosted the global stockpiles. International Grains Council estimated that output will increase 5 percent to 684 million metric tons in the 12 months ending June 30, pushing inventories to the highest level in a decade. The supply expanded as major wheat exporters, such as Russia and Ukraine, resumed their shipments after the drought last year.

Wheat was up today from $6.2300 to $$6.3575 per bushel as of 22:27 GMT on CBoT, following yesterday’s decline from $6.2900 to $6.2225 per bushel. Spot price for Brent crude jumped today $109.11 to $110.83 per barrel today on ICE, rebounding from the daily low of $107.83 per barrel.

The US Federal Reserve held the key interest rate unchanged at the record low level and spoke in monetary policy statement about potential future hardships that the US economy may face. Commodities, including copper and oil, reacted negatively to the dovish statement.

The Fed left the federal funds rate near zero and announced the plan to buy $400 billion of long-term securities. The central bank said “there are significant downside risks to the economic outlook”.

The Standard & Poor’s 500 Index slumped 2.9 percent, while the Standard & Poor’s GSCI Index dropped 1.6 percent to 628.17, the lowest intra-day level since August 19. The MSCI Asia Pacific Index tumbled as much as 3.2 percent.

The contract for delivery of copper in three months dropped 3.2 percent to $8,036.25 per metric ton on LME, the lowest price since November 17. November futures for delivery of crude oil slid $1.77 to $84.15 per barrel in electronic trading on NYMEX.

Crude oil today gained 1 percent, retreated 0.8 percent and later fluctuated. Crude gained as US reserves declined by 4.0 million barrels to 353.1 million last week, while analysts predicted a decline by 1.9 million. Oil lost its gains on speculation that the global economic growth is faltering. October contract for delivery of crude oil fell $0.07 to $89.27 per barrel by 12:13 on NYMEX, while today’s price range was from $88.59 to $90.23.

The same concerns that hurt oil boosted gold. Worries about economic recovery intensified after US jobless claim climbed from 412,000 to 414,000 last, while they were expected to go down to 407,000. Today’s speech of European Central Bank President Jean-Claude Trichet, after the central bank kept the target interest rate unchanged at 1.5 percent, were rather pessimistic and spurred the speculation the ECB is going to cut borrowing costs in the near future. Futures for delivery of gold in December rose $39.90 (2.2 percent) to $1,857.50 as of 14:18 on COMEX. The problems in Europe allowed the precious metal to advance 31 percent in 2011.

Copper gained today as macroeconomic data from the US increased optimism about the US economy. Factory orders rose 2.4 percent in July, following the drop by 0.4 percent in June. The Chicago Purchasing Managers Index slipped, but still was above forecasts, showing business expansion for 23rd month. December futures for delivery of copper gained $0.063 (1.5 percent) to $4.2045 per pound by 13:27 on COMEX.

Gold rallied today, capping the biggest monthly advance since November 2009, as the minutes of the Federal Open Market Committee, released yesterday, showed that most policy makers voted for keeping interest rates extremely low till mid-2013. Three Committee members agreed about necessity to keep rates low for some time, but perhaps for shorter period than proposed by majority. The minutes spurred talks that the Federal Reserve would introduce additional stimulus for the US economy. More stimulus means cheaper dollar and higher gold prices, therefore traders, who expect additional round of quantitative easing, were buying gold. December contract for delivery of gold advanced $1.90 (0.1 percent) to $1,831.70 as of 13:56 on COMEX.

Crude oil dropped below $80, while gold rallied to the new high after the Federal Reserve maintained its key interest rate at the record low level and hinted that it may leave interest rates very low for the next two years.

The Federal Open Market Committee said in its statement that “economic growth so far this year has been considerably slower than the Committee had expected”. As result the FOMC decided:

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The dovish statement reinforced pessimistic sentiment among traders. Gold profited from the negative sentiment, but other commodities, including crude oil and silver, suffered.

Contract for delivery of gold in December gained $29.80 (1.7 percent) to $1,743 per ounce as of 13:49 on COMEX after reaching the record of $1,782.50. Silver futures for delivery in September dropped $1.497 (3.8 percent) to $37.883 per ounce. September futures for crude oil delivery fell $2.01 to $79.30 on NYMEX, the lowest price since September 29.

Crude oil and copper fell as Moody’s Investor Service cut Portugal’s credit rating yesterday. The resulting surge of demand for a safe haven helped gold to gain for a second day.

Moody’s downgraded the credit rating of Portugal from Baa1 to Ba2 and issued a negative outlook yesterday. The agency explained this decision by concerns that the nation will require another bailout, but hasn’t achieved the target of deficit reduction and debt stabilization set by the European Union and the International Monetary Fund.

Demand for industrial metals and fuel also declined after China increased its interest rates.

August contract for gold delivery gained $16.50 (1.1 percent) to $1,529.20 per ounce as of 13:43 on COMEX. August futures for crude oil delivery dropped $0.24 to $96.65 per barrel on NYMEX. Contract for delivery of copper in three months fell 0.5 percent to $9,493 per metric ton before trading at $9,514.5 per ton on LME.

Crude oil fell today as the Federal Reserve lowered its growth forecast, causing the speculation that demand in the US, the biggest world user, will fall. The central bank kept the interest rates unchanged on today’s meeting and signaled that it’s going to maintain stimulus for prolonged time. Earlier crude gained as the US inventories declined more than expected. August futures for crude oil delivery fell as much as $1.11 (1.2 percent) to $94.30 per barrel on NYMEX, following yesterday’s advance by $1.24 to $95.41.

Gold jumped above $1,550 today as volatility on currency markets made precious metals more appealing as an investment. The euro fell today against the dollar on the speculation that Greece’s Prime Minister will face difficulties in implementing austerity measure even after he won the confidence vote. August futures for delivery of gold gained $7 (0.5 percent) to $1,553.40 per ounce by 13:50 on COMEX. July silver futures advanced $0.36 (1 percent) to $36.739. Futures for platinum delivery rose $5.20 (0.3 percent) to $1,752.40 per ounce on NYMEX. September futures for delivery of palladium went up $3.40 (0.4 percent) to $770.65 per ounce.

Crude oil advanced to the highest price this month after the Organization of Petroleum Exporting Countries members didn’t reached agreement about the production targets and as the US trade balance deficit unexpectedly shrank. The US trade balance posted a deficit of $43.7 billion in April, the smallest deficit since December. July contract for crude oil delivery rose $0.12 to $102.05 per barrel in electronic trading on NYMEX.

Gold gained on the speculation that the European sovereign-debt crisis may worsen. The European Central Bank maintained its key interest rate unchanged, while the trade balance of Germany and France worsened. Spot price was $1,543.88 per ounce, rising 0.1 percent over the week.

Copper went down on concern that demand will wane as central banks worldwide will increase interest rates to battle inflation. The industrial metal was softer as manufacturing declined in the US and China, two biggest consumers in the world. July contract for delivery of copper fell $0.001 to $4.1075 per pound by 13:16 on COMEX.

Gold was at the all-time high for the second day as demand for the precious metal as an inflation hedge increased, while silver touched the 31-year record today. Federal Reserve Chairman Ben S. Bernanke stated this week that inflation must be watched “extremely closely”. China increased its interest rates yesterday to combat inflation that grew at the fastest rate since 2008. June futures for gold delivery added $6 (0.4 percent) to $1,458.50 by 13:39 on COMEX. Contract for immediate delivery of gold surged in London to the all-time record of $1,462.30. May futures for silver delivery went up $0.204 (0.5 percent) to $39.387 per ounce on COMEX, following the jump to $39.785, the highest level since January 1980.

Crude oil climbed today to the highest level in 30 months on concerns that the situation in Libya may worsen. The North Atlantic Treaty Organization flew 155 missions yesterday and planned to perform another 198 today. The upcoming election in Nigeria, Africa’s top producer of crude, can also disrupt supplies. May futures for crude oil delivery increased by $0.49 to $108.83 per barrel on NYMEX, the highest price since September 22, 2008.