Commodities Update
A weekly round up of the latest commodity news in the UK. Updated every Thursday morning, the report tracks the price movements of popular commodities such as oil and gold.
Spot Gold Performance Chart (02/09/10 13:30)
| Daily % Chg | 0.21% | 3 months | 2.21% | |
| 1 week | 0.75% | 6 months | 10.13% | |
| 1 month | 5.12% | 1 year | 30.38% |
Details
| Prev close | 1244.30 | 52 week high | 1265.30 | |
| Last trade | 1246.90 | 52 week low | 946.55 | |
| High | 1249.65 | Low | 1237.65 |
Bloomberg Median Forecasts
| Q1 2010 | 1102.50 | Q3 2010 | 1210.00 | ||||
| Q2 2010 | 1150.00 | Q4 2010 | 1250.00 |
Commentary
With risk aversion remaining the dominant emotion among investors, gold hit a two-month high of $1,251.48 an ounce, the highest level since 28 June. Gold holdings through ten exchange-traded products (ETPs) tracked by Bloomberg rose to 2,079.48 metric tonnes, beating the 19 July record of 2,078.05 tonnes. 278 tonnes of gold have been accumulated by ETPs so far in 2010, and the figure of 2,078.05 tonnes is almost double the official reserves of Switzerland. Gold’s status as the ultimate safe-haven asset appears to be the main driver behind recent increases, as uncertainty about the global economy continues to worry markets. Peter Hambro, chairman of gold miner Petropavlovsk, commented this week in an interview with Bloomberg that the chances of gold prices rising about $1,500 an ounce were ‘very real’, and a Bloomberg survey of traders and investors backed Hambro’s view. Buying of physical gold by countries continued, with Russia adding 16.2 tonnes to its holdings according to data from the IMF. Gold prices did stumble on Wednesday after US and Chinese manufacturing improved by more than predicted which sparked a sharp rally in equities that alleviated risk aversion at least momentarily. However, gold resumed its slow upward trend on Thursday. If the Bank of Japan takes concrete steps to weaken the yen versus the US dollar, then the gold price may see further increases as investors exit declining currencies and increase purchases of gold, both in its physical form and via ETPs. David Choe, London
October NYMEX Crude Oil Performance Chart (02/09/10 13:30)
| Daily % Chg | -0.39% | 3 months | -5.60% | |
| 1 week | 0.35% | 6 months | -8.83% | |
| 1 month | -11.29% | 1 year | -8.15% |
Details
| Prev close | 73.52 | 52 week high | 92.75 | |
| Last trade | 73.62 | 52 week low | 70.35 | |
| High | 74.19 | Low | 73.57 |
Bloomberg Median Forecasts
| Q1 2010 | 77.00 | Q3 2010 | 77.50 | |
| Q2 2010 | 80.00 | Q4 2010 | 80.00 | |
Commentary
Crude oil for October delivery was little changed over the past week, gaining a meagre 0.35% to trade at $73.62 a barrel. August proved to be a horrible month for sweet crude, losing 11.29%. It’s been a tug-of-war for oil prices the last week, with sharp equity rallies and equally sharp equity sell-offs adding to the volatility and uncertainty in prices. The current trajectory for oil is pointing lower as the EIA reported yet another increase in crude oil stockpiles on Wednesday, which rose by 3.4 million barrels in the last week. Analysts projected an increase of 1.2 million barrels. However, gasoline and distillates did see a reduction in supplies, falling by a 200,000 and 700,000 barrels respectively. Nevertheless, the combined oil inventories are now at 27 year highs, and at these levels are likely to suppress crude oil prices in the near term. The US is still the world’s largest oil consumer, so until concrete evidence is received that the US economy is gaining traction, the downside risks for oil are expected to remain. Cude oil prices tend to track equity markets very closely, so any ugly surprises from the US non-farm payroll data on Friday could further hurt crude oil prices in the short-term. David Choe, London
September Copper (COMEX) Performance Chart (02/09/10 13:30)
| Daily % Chg | 0.19% | 3 months | 17.16% | |
| 1 week | 5.16% | 6 months | 3.04% | |
| 1 month | 3.47% | 1 year | 26.50% |
Details
| Prev close | 346.85 | 52 week high | 366.70 | |
| Last trade | 347.50 | 52 week low | 269.00 | |
| High | 348.85 | Low | 345.75 |
Bloomberg Median Forecasts
| Q1 2010 | 325.00 | Q3 2010 | 315.00 | |
| Q2 2010 | 313.00 | Q4 2010 | 322.00 | |
Commentary
Copper was a stellar performer in the last week, rising 5.16% since last Thursday and is currently trading at $3.4750 an ounce. There were two main catalysts that led opper prices to gain in the last week. The first came after Fed Chairman Ben Bernanke made an address at the Kansas City Federal Reserve economic conference where he reassured investors that the Fed would do whatever was necessary to avoid a double-dip recession and fight deflation. This sent equity markets soaring and revived hope that the US economy would continue to see growth under Mr Bernanke’s watchful eye. Copper tends to track closely with economic growth as the metal is primarily used in construction and industrial production. The second springboard for copper came on Wednesday when investors received a double whammy of positive surprises in the manufacturing sector in the world’s two biggest economies. The ISM Manufacturing Index showed an unexpected increase in manufacturing growth in the US during August, while China reported a larger-than-anticipated rise in manufacturing activity during the same month. This latest gauge is likely to support copper prices in the short-term as manufacturing growth has a direct impact on copper demand. The longer term prospects for copper are quite compelling. If global growth picks up next year as many economists are forecasting, there should be strong demand for copper as developing nations accelerate construction. Even in developed nations, the upgrading of old power grids and the move towards smart grid technology is also likely to boost physical demand for copper which is used extensively in wiring. Copper may see some volatility in the coming months as investors try to determine which way the global economy is heading, however, in my view, any sharp declines in copper may provide a good entry point to take a position for the long term. David Choe, London
Notes: Chart data sourced from Bloomberg. Bloomberg Median Forecasts are produced by Bloomberg by taking the median level from rates forecast by a number of contributors. These contributors consist of leading banks and security firms.
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