Commodity Blog

Posts Tagged ‘United States’

Crude oil rallied today together with other commodities, while gold declined as traders preferred riskier assets. The major news topic today was US employment that was much better than analysts predicted.

US nonfarm payrolls rose by 243,000 jobs in January. That’s compared to the average forecast of 150,000 and the December growth by 203,000. The unemployment rate fell to 8.3 percent, making a pleasant surprise for market participants, who expected it to stay at 8.5 percent.

Carsten Fritsch, analyst at Commerzbank, spoke about the positive impact of the news, but also mentioned a negative side of the employment growth regarding commodity prices:

The jobs data shows the economy is gaining momentum. This is bullish for risk appetite and therefore for commodity prices. However, it may limit the scope for a third round of quantitative easing, and this may limit gains.

March futures for delivery of crude oil gained $1.11 to $97.47 per barrel before trading at $96.89 by 13:42 on NYMEX. Spot price for Brent crude went up from $112.50 to $113.34 per barrel as of 17:41 GMT today on ICE. Gold dropped from $1,758.70 to $1,736.70 on COMEX today.

Commodities rallied as Federal Reserve Chairman Ben Bernanke said yesterday that he expects the US economy to grow with faster pace this year. Gold joined the rally and was further boosted by prospects for quantitative easing if such outlook would prove to be wrong.

Bernanke explained how external influences, like the earthquake in Japan and Europe’s crisis, hurt the US economy in 2011, but added:

Fortunately, over the past few months, indicators of spending, production, and job market activity have shown some signs of improvement; and, in economic projections just released, Federal Open Market Committee (FOMC) participants indicated that they expect somewhat stronger growth this year than in 2011.

Positive performance of the US economy isn’t guaranteed, though, as Chairman explained:

The outlook remains uncertain, however, and close monitoring of economic developments will remain necessary.

Such comments leave place for additional stimulus that may be beneficial for gold prices.

The economic situation in the United States is balance in a unique way as both improvement and deteriorating of the economy may prove positive for the precious metal. Prices for gold reflected that by climbing by 11 percent in January.

Gold traded at $1,756.70 as of 4:23 GMT today on COMEX after jumping from $1,745.10 to $1,759.50 yesterday.

Cocoa dropped on concerns about the European crisis and the slower-than-expected economic growth in the United States. Traders remained concerned about the potential outcome of talks among Greece and its creditors. US gross domestic product rose 2.8 percent in the last quarter, while the expected growth was 3.0 percent. It’s still better than the 1.8 percent advance in the third quarter of 2011.

Earlier, the agricultural commodity reached the highest price since November as European NYSE-monitored stockpiles fell 1.8 percent since January 9. Additionally, concerns that dry weather in Ivory Coast will hurt output were boosting prices.

Cocoa closed at $2,361 per metric ton on ICE, falling from the opening of $2,452. Intraday, the price reached $2,480 — the highest level since November 14.

Soybeans and rubber declined today as macroeconomic data from the United States showed decreasing number of new home sales and increasing number of unemployment claims. Claims for unemployment benefits rose from 356,000 to 377,000 last week. New homes sales were at a seasonally adjusted rate of 307,000 in December, compared to the median forecast of 321,000 and the November value of 314,000.

Yesterday, soybeans advanced as the pledge of the US Federal Reserve to keep interest rate record low till 2014 was supporting commodities. The Standard & Poor’s GSCI Spot Index of 24 commodities added 1.5 percent yesterday.

Futures for delivery of rubber in July went down to 316.4 yen per kilogram ($4,087 per metric ton) before trading at 317.3 yen on the Tokyo Commodity Exchange. Soybeans fell from $12.2175 to $12.1825 per bushel as of 6:31 GMT on CBoT after reaching the highest price since January 3 of $12.3500 yesterday.

Cattle prices touched a record for the fifth time this month as cattle suppliers are unable to keep up with rising demand for US beef. Farmer’s haven’t been able to provide enough supply to meatpackers as drought made them to cut herds earlier this year. Prices for feeder-cattle also rose. April futures for delivery of cattle gained 0.5 percent to $1.285 per pound by 9:27 on CME and reached the record high of $1.29325 earlier. March contract for feeder-cattle deliver went up 0.5 percent to $1.547 per, while earlier the settlement reached the all-time high of $1.55275.

Orange-juice futures also reached a record today. Citrus crops in Texas were hit by greening disease that has already caused an extensive damage to plants in Florida. At the same time, the US Food and Drug Administration halted juice imports from Brazil to check for banned fungicide. Futures for delivery of orange juice in March rose by the exchange limit of $0.1 (5 percent) to the record of $2.1065 per pound as of 11:00 on ICE.

Crude oil futures rose today as the growing economy of the United States reduced nation’s inventories and on concerns that Iran may disrupt supply by blocking the Strait of Hormuz.

US commercial crude oil inventories declined 3.4 million barrels last week. An increase by 2.9 million was predicted by specialists. Currently the stockpiles stand at 331.2 million barrels.

Mohammad Khazaee, Ambassador of Iran to the United Nations, explained:

There is no decision to block and close the Strait of Hormuz unless Iran is threatened seriously and somebody wants to tighten the noose. All the options are, or would be, on the table.

February futures for delivery of crude oil rallied by $1.42 to $102.01 per barrel in electronic trading on NYMEX before trading at $101.74 as of 13:03. Brent went from $111.53 to $112.01 per barrel today as of 5:24 GMT on ICE.

Gold was a stellar performer in 2010 and traders entered 2011 extremely bullish on gold. Some experts were talking about $3,000 and even $5,000 per troy ounce. Indeed, the metal reached a new record high last year, even though it wasn’t gaining as fast as most optimistic forecasters predicted. Yet the end of 2011 left market participants disappointed as gold dropped sharply and had hard time recovering from the loss. Many traders wonder: is there any reason to remain bullish on the precious metal?

The short answer is “yes”. The long answer: most market analysts name a several reasons to be optimistic about gold, but they remain more cautious than at the beginning of the last year. They name several reasons to be bullish on gold: attempts of developed nations to devaluate their currencies and physical demand from Asia. The United States is perhaps the major contributor to optimism for the precious metal as its low interest rates and a possible next round of quantitative easing add to inflationary pressure to the upside for gold. Central banks across the world also stepped in, boosting their gold reserves to diversify from the US currency.

What about downside factors for gold? There is one most important threat for the commodity: Europe. It may look strange at first as the European debt crisis should add to safe-haven attractiveness of gold, but one needs just to recall 2008, when all commodities were tumbling, even precious metals. A serious crisis can be negative for gold and the problems of Europe look serious enough.

Mark Leibovit, editor of the VRTrader newsletter, said in December:

We might hit bottom in a month or so. How far it might go depends on how the technicals unfold. Short-term it’s held the September lows of $1,531. But we have to see it perform in both time and price to confirm it. What might it take do so? We’d need to see the equity market improve, Europe improve, and maybe a QE3.

That outlines the major factors for gold. In case the Federal Reserve would embark on a new round of easing and Europe would emerge from its crisis relatively unscathed, the precious metal will jump to new records. Consequently, gold is in danger in scenario where the USA would recover without additional stimulus, while the eurozone woes would strengthen. If anything, such scenario would boost the dollar, hitting prices for all commodities, gold included. Unfortunately for gold bulls, such scenario is quite possible as America shows signs of recovery, reducing need for stimulus, while European politicians lack courage to make bold moves for saving the European Union from its credit crunch.

Most analysts remain optimistic for gold, though less bold in promising new records. They believe that the metal will reach $2,000 per ounce in 2012, but it won’t move in a straight line and strong corrections can be expected. The worst case scenario may push gold to $1,270, but it’s not likely to go lower, at least not in 2012. In fact, forecasters thought that gold would be weak at the beginning of this year, but for now the precious metal proves to be more resilient than it was given credit for.

Crude oil declined today as threat of sanctions against Iran lessened. There are rumors that the International Atomic Energy Agency will discuss with Iran its nuclear program. In the meantime, European Union officials said that an embargo on Iranian oil exports may be postponed for six months. There is no more rush to buy oil and prices reacted accordingly. February futures for crude oil delivery slipped $0.79 (0.8 percent) to $98.31 per barrel by 13:36 on NYMEX. Brent oil declined from $111.01 to $110.91 per barrel as of 20:53 GMT today on ICE, while earlier it touched $109.71 — the lowest price since January 3.

Cattle advanced as demand for beef rose, while supply decreased. Beef price increased 5 percent in the United States this year, following the 10 percent increase in 2011. Beef exports jumped 25 percent in the 10 months ended October 31 from a year ago, while cattle herds were record small last year. April futures for cattle delivery rose 0.9 percent to $1.264 per pound at 13:00 on CME.

Gold and oil rose today, as well as most commodities, as manufacturing in China and the United States expanded. Silver also gained. The China Federation of Logistics and Purchasing reported that the nation’s Purchasing Managers’ Index increased from 49.0 to 50.3 in December. The US PMI advanced from 52.7 to 53.9 last month.

Both commodities also gained on rumors that Iran made headway in creating nuclear weapon. Gold rallied as the rumors increased its appeal as a safe asset, while oil rose on concerns that sanctions against the country from the USA would disrupt shipments.

February futures for crude oil delivery advanced as much as $4.13 to $102.96 per barrel on NYMEX, the highest price since May 10. Brent crude surged from $108.38 to $112.07 per barrel today as of 23:18 GMT on ICE. Gold was up from $1,570.10 to $1,606.70 per ounce, while silver spot price went higher from $28.17 to $29.55 per ounce on COMEX.

Oil fell as China’s manufacturing decline. The HSBC/Markit China Manufacturing PMI fell from 49.0 to 48.7 in December. A value below 50.0 indicates contraction. Europe also continued to hurt commodities. February futures for delivery of crude oil fell $0.82 to $98.83 per barrel on NYMEX. Brent fell from $108.04 to $107.76 per barrel on ICE.

Copper performed better on hopes that the US economic growth would outweigh the problems in Europe and the slowdown in China. The US PMI is expected to post a positive reading next week. The US economy grew 1.8 percent this year and analysts predict that it’ll expand 2.1 percent in 2011. Copper advanced from $3.4220 to $3.4315 per pound on COMEX.