By the early US session, gold wasn’t setting new record highs; but the precious metal was nonetheless deep in the green at the open of the week. The Columbus Day holiday in the US is notably influencing price action; but with exchanges still open and global investors filling out open interest, the market is far from dead.
North American Commodity Update, Last Updated 10/12/2009 1:14 PM EST (GMT = EDT +4:00)
Commodities - Energy
Crude Nears One-Year High as Risk Appetite Stokes Confidence in Economic Recovery
Crude Oil (WTI) - $73.41 // $1.63 // 2.24%
Just like the other risk-sensitive assets, energy commodities were climbing through Monday’s light session. However, for crude, the advance would mean clearing $72/barrel and topping a six-week high of $73.84. The near 12-month high set in late August is within sight; but the market will struggle to find the necessary interest to revive its trend when broader market sentiment isn’t forging a new path. Nonetheless, much of this morning’s strength is attributed to the optimism that has raised equities and the relative weakness of the US dollar – the primary dealing currency for the commodity. Last week’s story from the Independent is still weighing on the currency and the relationship between dollar and crude. Despite the time frame for the swap and the supposed players denial that such a discussion was even taking place, the changes make sense given policy efforts over the past year. Among other factors at play, momentum following the IEA’s upgraded forecast for crude demand on Friday was still playing out. The group forecasted 86.1 million barrels per day through 2010, an increase of 1.7 percent from current measures of demand. Also, over the weekend, Kuwaiti oil minister Sheik Al Abdullah Al Sabah commented a range on oil prices between $60 and $80 per barrel was reasonable – valuable confirmation considering the nations are largely dependent on their energy exports and their economies suffer when prices fall too far. Commitment of Traders figures show speculative long positions on crude futures outnumbered shorts by 50,006 contracts. Commercials are net short on 44,287 contracts.
Commodities - Metals
Gold and Silver Gain on Dollar’s Decline Despite Thin Markets
Gold - $1055.13 // $5.88 // 0.56%
By the early US session, gold wasn’t setting new record highs; but the precious metal was nonetheless deep in the green at the open of the week. The Columbus Day holiday in the US is notably influencing price action; but with exchanges still open and global investors filling out open interest, the market is far from dead. A modest, bullish bias has developed through Monday’s session; but volatility has been notably restrained. For a catalyst to this slow advance towards the record high $1,061.55 set last week, we have seen the struggling US dollar dive through Monday’s session. Considering the rise in commodities and equities, risk appetite is seemingly still on the rise; but a cautionary tone is building in the background. Momentum behind speculative assets continues to ebb and the traditional safety nets (including the dollar) are growing unstable. Fulfilling both the needs of return and safety, gold is once again stepping up as the asset of choice in uncertain market conditions. However, should sentiment see a notable reversal sometime this week, this commodity will likely suffer the same fate as the Dow given the extremes it is currently pushing.
Silver - $17.79 // $0.07 // 0.40%
Silver tested a fresh 14-month high of $17.96 just after the open of electronic trading early Monday morning in the Asian session. However, the dramatic 1.5 percent rally would quietly resign to chop for the rest of the Asian and European sessions. Just as with its more pricey cousin (gold), this metal was finding interest through the broader market’s appetite for risk and underlying suspicions of risk trends. Aside from this influence, ETF Securities reported their silver holdings grew 0.6 percent to 20.585 million ounces. From Friday, Comex silver stocks were down 232,349 ounces to 115.926 million.
Written by: John Kicklighter, Currency Strategist for DailyFX.com
Questions? Comments? Send them to John at <[email protected]>