Demand

Daily Commodities Fundamentals: Commodities Close Lower Entering the Weekend

North American Commodity Update, Last Updated 8/14/2009 3:51 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Sold Following a Disappointing Consumer Confidence Report

Crude Oil (WTI)   $67.530                         -$2.990                             -4.24%
Crude Oil future prices plummeted today, ending the week with a 3.5% decline back below the psychological $70-per-barrel level. After a week’s worth of important fundamental data releases including the FOMC rate decision and Bank of England Quarterly Inflation Report, the University of Michigan’s Consumer Confidence report turned out to be the main market mover. While this may seem strange, it is not that surprising when put into context; recent data releases have encouraged investors to re-enter higher yielding assets in hopes of a global economic recovery. Equity markets have rallied, which has translated to a bid up of Crude future prices as speculators predict a short-to-medium term hike in demand. Many believed that the United States would be one of the first countries to successfully escape the prolonged global recession; however, today’s consumer confidence figure revealed that Americans are not willing to take the lead. Consumer confidence was expected to increase from 66.0 to 69.0, but upon release, the report showed that the figure had actually dropped to 63.2. As a result, Crude future prices faced a severe sell-off as investors return towards safer assets and wait for an economic turnaround. Looking towards next week, crude could potentially retest the $70-per-barrel level before giving in to the true, market-moving fundamentals.

Department of Energy Inventories

Commodities – Metals

Stronger Dollar and Bearish Outlook Drive Precious Metals Lower

Gold                   $949.000                      -$7.500                           -0.78%
Gold future prices finished lower to close out the week, again losing as the US dollar strengthened. After a worse-than-expected US Confidence Report, the greenback gained across the board as investors flocked towards the relatively safe dollar and fled from higher-yielding assets (equity markets fell significantly). Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness/inflation. Simultaneous to the dollar’s advance, today’s Euro-Zone and US CPI reports revealed that inflation is not likely to be of concern in the near-term. This fact was already suggested in numerous global bank statements during the last two weeks. Though Gold’s correlation with the dollar index is not remarkably high, dollar strength should continue to be an indication for Gold price action. Therefore, any encouraging fundamental releases that heighten risk appetite will likely translate into future price increases as well.

Silver                 $14.675                    -$0.312                           -2.08%
Silver futures could not hold on to yesterday’s gains during a volatile day of trading; the metal lost nearly 2% as investors turned bearish following the University of Michigan’s Consumer Confidence report. Though Silver is considered a precious metal like Gold, it has seen far more drastic price action due to its other application. Because Silver doubles as an industrial input, it is particulary sensitive to any changes in global economic outlook. Despite a better-than-expected US Industrial Production figure (0.5% actual vs. 0.4% expected), investors’ recent bullish forecast was not carried into the weekend. As for next week, expect Silver to follow investor sentiment; only time will tell which direction that will be.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Demand

Global Macro Weekly: Treasury Price Action More Reflective of Underlying Fundamentals

With the exception of the 10-Year, all other markets are pushing to fresh 2009 highs as investor risk appetite improves following the release of much better Q2 earning results and a more solid outlook for the global economy. However, we continue to remain suspicious of any rallies in risk appetite as reflected in the global macro markets. While we have seen some impressive buying back into risk, we still hang onto the idea that market participants will once again look to pare back risk, as the reality of uncertainty within the global economy persists. As such, we contend that price action in the 10-Year is more reflective of the underlying fundamentals.

EUR/USD
EUR/USD – Price action remains extremely choppy with the market whipsawing between 1.4000 and 1.4340 in recent trade. However, at this point it appears as though bulls are winning out, with any pullbacks easily met by intense buying. A closer look at the weekly suggests that we are on the verge of another major upside break following consolidation since May, which if broken, would project gains towards 1.5000. Look for a break above 1.4340 and close above the 100-Week SMA to confirm. Strategy: STAND ASIDE

S&P 500 INDEX

S&P 500 Index – The market is now trading back to some consolidation highs from October and November of 2008, and with daily studies trading into overbought territory, the greater risks from here are for a significant corrective pullback over the coming days/weeks. The broader trend is still bearish and a medium-term lower top is now sought out ahead of the next drop. At a minimum, more consolidation is to be expected which should result in a sell-off towards 850-900. Strategy: LOOK TO SELL

CRUDE OIL

Crude Oil – A minor sell-off in the previous week has now been fully negated with the market intent on retesting the 2009 highs above $73 from late June. At this point, daily studies still show room to run and we would expect to see a break back above $73 to fresh 2009 highs in the $75 area over the coming sessions. However, once $75 is reached, we would recommend looking for opportunities to fade and additional rallies. A break back below $63 is now required to take pressure off of the topside. Strategy: LOOK TO SELL

10-YEAR TREASURY

10-Year Treasury – While a compelling argument can be made for some bearish consolidation here ahead of the next major drop below the 2009 lows at 114-08, we continue to favor the bullish side, arguing for the formation of a major base. However, the market will need to break back above 119 to confirm our constructive outlook with the break to trigger a double bottom that will project fresh upside back towards the 124 area over the coming weeks. Below 114-08 negates. Strategy: LOOK TO BUY

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to receive Joel’s reports in a more timely fashion, e-mail jskruger@fxcm.com and you will be added to the “distribution” list.

Joel Kruger publishes 6 daily pieces:

“Tech Talk” – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)

“Morning Slices” – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).
Monday-Friday (between 6:30am-7:30am EST)

“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)

“Midday Snapshot” – A Midday Fundamental Update, along with Technical Analysis of Selected Rates.
Monday-Friday (between 10:30am-11:30am EST)

“Scandi Daily” – A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (This report is only distributed through email. Please contact Nordic@fxcm.com if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)

“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)

Demand

Daily Commodities Fundamentals: Commodities End the Week on a Bullish Note

North American Commodity Update, Last Updated 7/31/2009 4:30 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Finish Week Off Strong

Crude Oil (WTI)   $69.220                         +$2.280                             +3.41%
Crude Oil future prices advanced further today, marking a complete retracement of Wednesday’s near 6.5% decline. Mixed fundamental data, including the US 2Q GDP report, led to Crude’s near 3% increase up towards $69-per-barrel. At 8:30 AM EST, the Department of Commerce reported a 1.0% contraction in GDP, less than the 1.5% expectation. However, further analysis is required to fully understand the report. In the report, 1Q GDP was revised down to -6.4% from -5.5%, meaning that the recession had been even more extreme than we thought. Also, despite the bullish total GDP figure, US Personal Consumption (a component of GDP) fell by 1.2%, a steeper decline than the projected 0.5% fall. Personal consumption is a leading indicator for future economic growth, as it can indicate both consumer confidence and spending. Many believe that the 2Q GDP was inflated by another one of its components, Government Expenditures.  Regardless, commodity traders were bullish following the news, leading to Crude’s increase. It will be interesting to see if Crude can finally hold onto these gains even though demand remains extremely weak. Next week could prove to be volatile, as three major national banks (BoE, ECB, RBA) are all due for their respective key lending rate decisions.

Department of Energy Inventories

Commodities – Metals

Precious Metals End Higher After Volatile Week of Trading

Gold                   $954.100                           +$16.800                           +1.79%
As expected, Gold continued to gain during intraday trading, again breaking through the psychological $950-per-ounce level before closing around $956. Today’s 2% price increase was largely due to extreme US dollar weakness, as investors again sold the safe dollar in favor of higher yielding currencies. The Dollar Index actually broke through key support level today around 78.3 before re-establishing itself, preventing breakout losses for the greenback. All the major currencies had gained over 1% on the dollar (excluding the Canadian dollar) as of 4:00 PM EST. Recall that Gold and the greenback tend to trade inversely as speculators use the metal to hedge against dollar weakness and/or inflation.

Silver                 $13.905                             +$0.420                              +3.11%
Silver closed the week on a positive note, adding another 3% to what has become a volatile three days. Like Gold, Silver benefitted from today’s extreme dollar weakness against its major competitors. Foreign currencies rallied against the greenback as risk appetite drove dollar to the absolute edge of a breakout. The US 2Q GDP report, though not immediately influential, ended up being a significant market mover today. On Monday, the US ISM Manufacturing figure is due at 10:00 AM EST. The survey questions US industry executives about future production, inventories, employment, etc. It has potential to drive Silver prices upon its release.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Demand

Daily Commodities Fundamentals: Commodities Bounce Back After Yesterday’s Steep Declines

North American Commodity Update, Last Updated 7/30/2009 2:01 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Bounce Back 5% After Yesterday’s Steep Decline

Crude Oil (WTI)   $66.560                         +$3.210                             +5.07%
Volatility has been the story in the market for Crude Oil futures as yesterday’s 6.5% freefall was followed by a 5% price increase  to spike above $67-per-barrel during intraday trading. Yesterday’s Department of Energy stockpile report, which revealed a 5.15 million barrel increase in Crude Oil inventory as opposed to an expected 1.50 million barrel contraction, trimmed nearly one third of the commodity’s gains since mid-July. Demand for Crude has been historically weak this summer as companies limit their consumption. However, Thursday’s encouraging fundamental data releases and better-than-expected corporate earnings reports returned Crude to its winning ways of late. In early morning trading, the Housing Industry of Australia’s New Home Sales MoM figure for June was 0.5%, up from -5.6% in May. An increase in home sales signals a growing housing market, an essential component of a global economic recovery. In Germany, the Euro-Zone’s largest economy based on Nominal GDP, the unemployment rate was held constant since last month. The Euro-Zone’s Economic Confidence Indicator beat expectations, coming in at 76.0 (75.0 expected).  The positive fundamental news from the global economy heightened investor demand for risk appetite, leading to an increase in Crude future prices despite yesterday’s demand concerns. However, perhaps the most market-moving factor in Crude trading on Thursday was the barrage of optimistic corporate earnings releases that hinted towards an end to the global economic recession. This quarter in particular, projected EPS figures have been reduced so significantly that companies have managed to exceed expectations by simply cost cutting. As a result, nearly 80% of the S&P 500 companies that have reported their 2Q earnings beat expectations. And while the trend continued today, numerous companies not only posted good earnings but also improved their economic outlook for the remainder of 2009.  As we approach the end of a volatile week for Crude, the psychological $65-per-barrel level remains in the rearview mirror. The CFTC hearings have come to a close, but Chairman Gensler seems determined to regulate commodity speculation, saying that “inaction is just not acceptable.” Lingering concern of government regulation will continue to impact the broader commodity market.

Department of Energy Inventories

Commodities – Metals

Precious Metals Push Forward, Accelerate at US Session Open

Gold                   $936.000                           +$6.300                           +0.68%
During yesterday’s trading session, Gold future prices managed to avoid heavy losses by only losing 1%. Risk aversion had bid the US dollar against its major competitors as investors fled from higher yielding currencies towards the “safe-haven currency.” Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness and/or inflation. Today’s rise in equities (the S&P hit its highest level in 9 months while the NASDAQ broke through 2,000 during intraday trading) and encouraging fundamental data reports renewed investment in  riskier assets, particularly the commodity-correlated Australian dollar, which outperformed all of its major competitors. The prospect of a global economic recovery carries with it inflationary fear, which may be confirmed by this evening’s Japanese Consumer Price Index report. Gold future prices saw nearly a full percentage point gain as a result, perhaps signaling a short-term re-test of the psychological $950-per-ounce price level.

Silver                 $13.460                          +$0.202                          +1.52%
Silver successfully bounced back from yesterday’s 3.5% decline, paring losses to close near the $13.500-per-ounce level. As was the case with Gold, dollar strength drove Silver prices downward yesterday. However, in addition to functioning as a precious metal, Silver holds its own industrial applications that make its future price particularly susceptible to fundamental data reports concerning global production. Yesterday’s disappointing US Durable Goods Orders figure (-2.5% actual vs. -0.6% expected) contributed to the metal’s steep decline; because Durable Goods last over three years by nature, they can be used as an indication of economic optimism regarding near-term growth.  During today’s trading session, fundamentals seemed to point in the opposite direction. Japanese industrial production increased for the 4th straight month, which got the market moving. In the US session, the advancement of equities kept Silver strong throughout the day. The US 2Q GDP report will be the main market mover tomorrow; GDP is expected to contract an additional 1.5%, indicating a reduced pace of recession after the 1Q 5.5% contraction. If GDP manages to beat expectations, Silver could see significant upside.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Demand

Daily Commodities Fundamentals:Crude Slips But Metals Stand Strong

North American Commodity Update, Last Updated 7/22/2009 3:55 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Retrace Slightly, Avoid Serious Decline

Crude Oil (WTI)   $65.280                         -$0.330                             -0.50%
Crude Oil future prices saw a decline back towards the psychological $65-per-barrel level today after the Department of Energy reported worse-than-expected Crude inventory figures (see below). US Crude Inventories fell by 1.8 million barrels compared to the 2.1 million expected drop, signaling that demand, which was already weak, may be even less than expected. Just yesterday, OPEC announced that they would consider a cut in supply for the month of September; such an action will become increasingly more likely if demand continues to contract. Crude prices managed to ward off major declines today, however, as US equities and Canadian Retail Sales figures both generated optimism in the global market. Though Wells Fargo reported disappointing earnings today, both Apple and Starbucks exceeded expectations. Major US indices ended near even, while European markets closed slightly higher. The Canadian Retail Sales report, historically a commodity market-mover, came in higher than expected (0.5% expected vs. 1.2% actual). Crude prices, which are free of any technical resistance until  $66.68, have room to improve in the short-term if encouraging fundamental data emerges.

Upcoming Department of Energy Inventories

Commodities – Metals

Precious Metals Manage Gains

Gold                   $950.900                           +$4.000                           +0.42%
Gold future prices broke through the psychological $950-per-ounce level during intraday trading only to retrace and close near even for the second day in a row. As Fed Chairman Bernanke faced the Senate today, his comments were interpreted to be surprisingly dovish, maintaining that a global economic recovery would be slow but will come, citing “notable improvements.” Bernanke did mention that rising unemployment would continue to thwart any short-term economic recovery. The US dollar lost to its major competitors today, though no significant breakouts existed. Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness/inflation. Gold future prices should continue to oscillate around the $950 level, following the dollar across periods of varying risk appetite.

Silver                 $13.670                    +$0.192                          +1.42%
Yesterday’s piece ended with the prediction that Canadian Retail Sales, if better than expected, would lead to an increase in Silver future prices. Canada reported a 1.2% growth in retail sales, more than doubling the expected 0.5% gain. The Retail Sales figure is a leading indicator for consumer confidence and consumption, two essential components to a global economic turnaround. The prospect of a near-term economic recovery drove Silver futures higher, as did the weaker dollar. Silver futures, benefitting from both improved industrial reports and dollar weakness, gained more noticeably than Gold. On tap for tomorrow: the UK’s Retail Sales report, which could prove to be as market moving as Canada’s.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Demand

Daily Commodities Fundamentals: Crude Gains, Metals Near Even on Quiet Day of Trading

North American Commodity Update, Last Updated 7/21/2009 4:20 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Push Higher After Encouraging Economic Releases

Crude Oil (WTI)   $64.720                         +$0.740                             +1.16%
Crude Oil future prices impressed again today, again adding another 1% during a relatively non-volatile day of commodity trading. Crude continues to waver around the psychological $65-per-barrel level, struggling to surpass it in the absence of a significant, market-mover. Crude futures benefitted early from the better-than-expected earnings report from Caterpillar, a company whose success by nature is indicative of future economic growth. The Bank of Canada also contributed to Crude’s increase, keeping the benchmark interest rate at 0.25% but improving growth forecasts for the next 18 months. Investors hope that future economic growth will stir Crude demand. However, on the supply side, OPEC is considering a cut in supply for the month of September; an intentional reduction in Crude supply can be used to artificially prop up the prices if they fall to an “unsatisfactory level” by OPEC’s standards. Tomorrow, the Department of Energy will release its weekly stockpile figures; Crude inventories are expected to drop by over two million barrels (see below). Demand for Crude has already been disappointing this summer, so a worse-than-expected release could reverse recent Crude gains.

Upcoming Department of Energy Inventories

Commodities – Metals

Gold Stays Put, Silver Retraces Marginally

Gold                   $948.100                           -$0.700                           -0.07%
As predicted yesterday, Gold future prices are struggling to break and stay above the psychological $950-per-ounce level. Today’s trading yielded little change in Gold as conflicting fundamental data kept net price change near zero. As has been the case for weeks now, the metal traded inversely to the US dollar, which closed higher against all its major competitors today (excluding the Japanese Yen) amid fear that US lender CIT will be seized by the FDIC as early as this August. Gold and the greenback often trade inversely as investors use the metal to hedge against dollar weakness/inflation. During today’s session, US Fed Chairman Bernanke gave his semi-annual address regarding the state of the economy; Gold future prices responded to Bernanke’s assessment that inflation was under control and that economic growth would be slow (but steady). As corporate earnings continue to emerge, Gold futures will continue to depend on investor risk appetite/aversion.

Silver                 $13.540                    -$0.085                          -0.62%
Silver finished slightly lower during today’s trading, given back nearly 0.5%. The stronger US dollar, a result of increased risk aversion, applied some downward pressure on Silver future prices. However, today’s price change may prove to be minimal compared to tomorrow’s potential move;  Wednesday should prove to be an eventful day for Silver future prices as numerous global fundamental data reports are expected to be released. First, the Australian Consumer Price Index may trigger inflationary fear, which could lead to an increase in precious metal prices. Due to Silver’s natural industrial uses, the German IFO Expectations could move the market by signaling near-term economic growth. Last, Canadian Retail Sales and UK Retail Sales are due Wednesday and Thursday, respectively; increased retail sales would indicate increased consumer spending, an essential component of a global economic turnaround.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Demand

Daily Commodities Fundamentals: Commodities Continue to Push Higher, Test Key Psychological Barriers

North American Commodity Update, Last Updated 7/20/2009 4:05 PM EST (GMT = EDT +5:00)

Commodities – Energy

Economic Optimism Drives Crude Prices Higher

Crude Oil (WTI)   $64.350                         +$0.790                             +1.24%
Crude Oil future prices picked up right where they left off last week, adding nearly another 1% during today’s trading session. Last week, Crude was driven by encouraging corporate earnings releases, better-than-expected employment figures and various other economic indicators all pointing to an economic turnaround. There were numerous reasons for Crude’s gain today, beginning with the US Leading Indicator, which increased by 0.7%, surpassing the 0.5% expectation. The indicator improved for the 3rd straight month, the first time we have seen such a streak since 2004. Increased economic optimism led to a speculation that demand for the commodity will soon increase, driving future prices higher. In related equity news, CIT Group announced a private-sector bailout today after the US Government refused to grant the struggling lender any more funding. The government’s refusal to issue more bailout funds revealed its newfound faith in the stability of the economy, contributing to additional commodity gains. European Equity Indices all closed higher during today’s trading, propping up the price of Crude near the $65-per-barrel level. Slight resistance exists just above $65, so Crude may struggle before eventually breaking this important price barrier.

Upcoming Department of Energy Inventories

Commodities – Metals

Precious Metals Achieve Gains on Weaker Greenback

Gold                   $949.700                           +$12.200                           +1.30%
Gold prices tapped a 5-week high at just under $955-per-ounce during today’s trading before falling back slightly to the psychological $950 level. Gold’s dramatic increase of late can be easily explained; the US dollar fell across the board today against its major competitors, falling to a 6-week low. Gold and the greenback often trade inversely as investors use the metal to hedge against dollar weakness/inflation. As investors prepare for an economic recovery, inflationary concerns set in and, in turn, bid up Gold future prices. Inflationary fears were so overwhelming that even an alarming German PPI report signaling deflation could not mute the metal’s gains today. Gold prices have struggled to remain above $950-per-barrel today, which may signal that investors are not ready to break the resistance quite yet. Expect prices to oscillate around this level in the short-run, though a breakthrough may be on the horizon.

Silver                 $13.635                    +$0.232                          +1.73%
Silver future prices continued to increase during today’s trading, bouncing off a recent low near $12.50 just two weeks ago. As was the case with Gold futures, Silver benefitted from dollar weakness as investors bought the metal to defend against inflation. The prospect of an economic recovery also drove Silver prices higher; the market continues to price in last week’s encouraging corporate earnings reports and positive leading indicators. The Bank of Canad’s Interest Rate Decision and various price index reports will be released; these announcements will move the commodity market as we learn more about global economic confidence and inflation.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Demand

Daily Commodities Fundamentals: Crude and Silver Finish Strong; Gold Breaks Even

North American Commodity Update, Last Updated 7/17/2009 4:15 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Futures Cap Off An Impressive Week

Crude Oil (WTI)   $63.420                         +$1.400                             +2.26%
Crude future prices finished the week strong today, rebounding from last week’s heavy losses. After hitting 3% gains during intraday trading, Crude has stalled out around $63.50-per-barrel, a 2.5% increase. Today’s US Housing Starts report was the likely driver of Crude, as the report indicated a greater-than-expected number of new houses built in the United States. The US Building Permits figure was also larger-than-expected .Newfound optimism in the global marketplace was this week’s theme, as investors are becoming slowly convinced that the worst of the recession has passed. Demand for Crude has been exceptionally week this summer, but the Department of Inventories latest figures were encouraging. Investors will pay close attention as corporate earnings season continues, looking for any signal that the recession is finally coming to a close. In the meantime, expect Crude prices to push forward, potentially testing the psychological $65-per-barrel mark sometime next week.

Upcoming Department of Energy Inventories

Commodities – Metals

Gold Trades Sideways, Silver Holds on to Minor Gains

Gold                   $936.000                           +$0.600                           +0.06%
Gold traded mostly sideways during today’s session on conflicting fundamental data. The US dollar, which has recently been a good contrarian indicator for Gold future price direction, was up against all majors. Though not necessarily permanent, investors ended the week favoring risk aversion. Encouraging corporate earnings releases next week could weaken the dollar as investors favor higher yielding (riskier) assets. Usually a stronger dollar leads to a decline in Gold prices, but this was not the case today. The prospect of a global economic recovery has sparked inflationary fear, propping up Gold prices despite the greenback’s strength. Australian and German PPI reports come out early Monday; any indication of inflation will drive Gold. Also, if corporate earnings continue to impress, Gold could re-test the $950-per-ounce level this month.

Silver                 $13.365                    +$0.130                          +0.98%
After falling to recent lows just last week, Silver is looking to close today’s trading with a noticeable recovery. As is usually the case with Silver, economic optimism leads to significant gains in future prices. Like Gold, inflationary fear resulting from this week’s CPI reports has helped Silver move higher, back above the $13-per-ounce level. Impressive fundamental data (corporate earnings, unemployment figures, industrial production reports) also pushed Silver higher despite the dollar’s strength today. Continued upward movement in Silver future prices would not be surprising, especially if the good news continues to flow in.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Demand

Daily Commodities Fundamentals: Mixed Economic Data Keeps Commodities Near Even

North American Commodity Update, Last Updated 7/16/2009 3:15 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Futures Trade Mostly Sideways on Slow Day

Crude Oil (WTI)   $62.070                         +$0.530                             +0.86%
On a quiet day of trading, Crude Oil futures built on yesterday’s gains during today’s trading session. Another better-than-expected earnings report from JP Morgan and surprising job figures from the US propped up Crude futures. Demand for petroleum products fell to their lowest levels in over a decade, however, which muted any potential price gains. Investors remain suspicious of an economic turnaround while Crude demand is still so low; though the Department of Energy’s Inventory report produced optimistic data regarding Crude stockpiles, Gasoline and Distillate inventories continued to rise (see below). The People’s Republic of China, the world’s top Crude consumer aside from the US, released encouraging GDP figures that barely budged Crude. With the CFTC regulation decision still looming, speculators must remain extra conservative. Be prepared for additional Crude price gains if tomorrow’s corporate earnings are deemed encouraging. If not, Crude could see extended losses back towards $60-per-barrel.

Upcoming Department of Energy Inventories

Commodities – Metals

Gold Trades Sideways, Silver Holds on to Minor Gains

Gold                   $936.600                           -$2.800                           -0.30%
Gold prices failed to extend this week’s gains, retracing slightly during today’s trading. Mixed economic data kept Gold relatively even on the day, as weakened demand for the metal offset dollar weakness. Throughout corporate earnings season so far, Gold has enjoyed optimistic data reports that drove investors towards higher yielding currencies and away from the relatively safe dollar. Recall that the dollar and Gold often trade inversely as investors use Gold to hedge against dollar weakness/inflation. However, even after yesterday’s US CPI report sparked inflationary fear, Gold failed to advance today as weak demand kept the price down. The psychological $950-per-ounce level seems to be providing some resistance for Gold but it may be tested if positive economic releases continue to emerge.

Silver                 $13.255                    +$0.047                          +0.36%
Silver managed to hold on to slight gains today, benefitting…. Silver has responded to this week’s corporate earnings reports as well as the weakened US dollar. Silver future prices may see large gains in the event of an economic turnaround based on the nature of the metal; because Silver is doubles as an industrial metal, it will benefit from any optimistic fundamental reports. It will also enjoy the same gains as Gold due to inflationary fear. In addition to tomorrow’s corporate earnings releases, the Canadian CPI report may be market moving as an signal for future inflation.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

Demand

Daily Commodities Fundamentals: Stronger Greenback Drives Crude to Recent Lows; Metals Fall Back

North American Commodity Update, Last Updated 7/6/2009 3:05 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Fall As Dollar Strengthens

Crude Oil (WTI)   $64.050                          -$2.680                             -4.02%
After the long holiday weekend, Crude picked up where it left off and declined during today’s session. This morning, the ISM Manufacturing survey exceeded expectations by showing the slowest rate of contraction in nine months. The survey figure reached 47, surpassing the expected 46 and provided slight optimism for economic stabilization. However, this report was not enough to counter the strengthening of the U.S. dollar due to increased risk aversion. Recall that just last week, the Non-farm Payroll indicated a rise in US unemployment to 9.5% and job loss figures were worse than expected (467K). Disappointing economic indicators point towards a prolonged global recession, leading to a bidding up of the “safe haven currency.” Fleeting optimism in the market may lead to further declines in the price of Crude, as widespread expectations of a late 2009 turnaround seem increasingly unlikely.

Upcoming Department of Energy Inventories

Commodities – Metals

Stronger Greenback Drives Precious Metal Prices Down

Gold                   $924.200                               -$6.800                               -0.73%
Gold prices fell today largely due to the strengthening of the U.S. dollar. Even though the use of the dollar as the reserve currency has been questioned of late, risk aversion has outweighed any immediate concerns regarding the greenback. An increasingly bearish outlook for the global economy has investors running towards the relatively safe dollar, which led to its impressive performance against its major competitors during today’s session. Gold and the dollar usually trade inversely as investors use Gold to hedge against a weaker dollar and/or inflation.  If other indicators begin to hint at an extended global recession, expect Gold prices to continue to fall.

Silver                 $13.260                                   -$0.148                          -1.10%
The combination of a stronger dollar and poor fundamental reports led to a greater decline in Silver futures than Gold futures. Like Gold, heightened risk aversion caused Silver future prices to decrease during today’s trading. However, unlike Gold, Silver is particularly influenced by global industrial reports. The market continues to react to the disappointing U.S. job reports of late last week. In addition, the ISM Manufacturing reading is still below 50, signaling a prolonged economic contraction. Expect Silver future prices to struggle in the short term.

-Written by Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to JSteinberg@fxcm.com

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