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Daily Commodities Fundamentals: Crude Loses, Precious Metals Trade Sideways

North American Commodity Update, Last Updated 8/11/2009 2:52 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Falls Near 2% During Intraday Trading

Crude Oil (WTI)          $69.360                         -$1.240                             -1.76%
Crude Oil future prices fell below the psychological $70-per-barrel level after losing nearly 2% during intraday trading. In order to avoid significant event risk surrounding tomorrow’s FOMC Interest Rate Decision, speculators are selling off their Crude positions, taking profits and waiting for a clearer signal regarding a potential  global economic recovery. Today’s sell-off did not face much resistance, as fundamental data supporting Crude’s recent surge has been hard to come by. demand for the commodity remains extremely low; just last week, the Department of Energy’s Crude stockpile report revealed a larger-than-expected in Crude inventory, pushing down future prices. The US Wholesale Inventories report revealed that inventories had plummeted by 1.7%, signaling that demand for Crude may remain weak as companies face diminished demand for their products. Tomorrow’s new DOE report will show any changes in Crude demand; this report combined with the FOMC Interest Rate Decision at 2:15 PM EST should yield significant price action tomorrow. Though no change of the key lending rate is expected, the commentary surrounding the event has potential to be market moving.

Department of Energy Inventories

Commodities – Metals

Precious Metals Waver, End Near Even

Gold                   $947.700                      +$0.800                           +0.08%
Gold future prices closed near even today, consolidating around the psychological $950-per-ounce level as speculators await tomorrow’s FOMC Rate Decision. US dollar activity has been a useful contrarian indicator for Gold price movement, as the two tend to trade inversely. Investors often use the metal to hedge against a weaker greenback or inflation. The commentary following tomorrow’s FOMC decision should provide better insight regarding near-term inflationary concern. If the Fed chooses to maintain the key lending rate (which it will) but continue to purchase treasuries as an economic stimulus, speculators may buy Gold to avoid a weaker greenback resulting from uncontrolled inflation. However, if the Fed hints that a rate hike may be in the near future, the US dollar would strengthen, potentially applying downward pressure on Gold. At 5:30 AM EST tomorrow, the Bank of England will release its Quarterly Inflation Report, which could also be market-moving for commodities.

Silver                 $14.325                    -$0.030                          -0.21%
Silver future prices traded sideways during today’s session, failing to rebound from yesterday’s small decline. As was the case for Gold, speculators seem to be waiting for tomorrow’s abundance of fundamental news reports that could all be potentially market moving. In addition to the FOMC Interest Rate Decision, we mentioned the Bank of England’s Quarterly Inflation Report. Historically speaking, this news release has been used as an opportunity for the Bank to make implications regarding its future monetary policy. The report is a broad assessment of various economic indicators in the UK, but the fact that the Bank’s Rate Decision was just last week may prevent significant market movement following the release. UK Unemployment is also expected to come across the wires; any changes in the UK job market could scare investors into relatively safer currencies such as the US dollar. Because Silver serves as both a precious metal and as an industrial input, it is particularly sensitive to the aforementioned fundamental reports. With that in mind, tomorrow has potential to be an eventful day for Silver future prices.

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

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Daily Commodities Fundamentals: The Week Opened Quietly, But Don’t Expect It to Last

North American Commodity Update, Last Updated 8/10/2009 4:06 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Pares Losses to Close Near Even

Crude Oil (WTI)   $70.960                         +$0.030                             +0.04%
Crude Oil future prices traded sideways today during a quiet US trading session. A lack of market-moving fundamental data release forced Crude to track equity markets and retreat amid US dollar strength for the majority of the day. All three major US equity indices closed lower today as investors engaged in some profit-taking following last week’s impressive performance. Crude tends to follow equity markets because of its function as an input price; global economic expansion would likely increase demand for Crude, which has been extremely weak this summer. Week after week, the US Department of Energy’s inventory figures have showed an oversaturated market with not enough demand for the commodity. This week, Crude stockpiles are expected to increase by another one million barrels. Crude prices have also reflected a stronger US dollar, which continued its gains from Friday following a better-than-expected NFP report. Tomorrow, the FOMC will begin its two day Monetary Policy Meeting; speculators believe that the key lending rate will remain at 0.25%, but the committee may hint towards a hike in rates as early as next year. Such a decision would lead to growing confidence in the global economy, potentially contributing to future Crude price increases.

Department of Energy Inventories

Commodities – Metals

Gold Trades Sideways, Silver Loses

Gold                   $948.100                           -$11.400                           -1.19%
Gold future prices fell the most in two weeks during intraday trading as prices tested and broke through the psychological $950-per-ounce level to close down 1.3% at $946. The move was a significant setback to any hopes of a near-term test of $1000, as the break below $950 could spark technical selling until $920-per-ounce. Gold’s decline was largely due to the stronger US dollar as it continues to gain against its major competitors following Friday’s NFP report. Job losses for July were approximately 80K less than expected and the unemployment rate dropped by 0.1% for the first time since April 2008. The U.S. dollar index was up 0.3% as of 3:00 PM EST but investors traded cautiously preceding tomorrow’s FOMC Monetary Policy meeting. The commentary surrounding tomorrow’s meeting will likely be the main market mover, as no tangible changes are expected just yet. Gold could see significant upside if the committee is concerned about future inflation as a result of the economic stimulus plan; Gold is often used as a hedge against dollar weakness and/or inflation.

Silver                 $14.365                           -$0.303                          -2.07%
Silver future prices lost nearly 2% as the US dollar continued to strengthen and investors pull back from their bullish sentiment that closed last week’s trading. Due to a shortage of market-moving fundamental data, mere speculation may be responsible for Silver’s noteworthy decline. An extension from Friday’s dollar strength contributed to the metal’s decline today, especially in anticipation of this week’s upcoming reports. In addition to the FOMC meeting, an array of potentially impactful releases is expected, including Euro-Zone CPI, the UK Unemployment Rate, and the UK’s Quarterly Inflation Report. After this week, we should have a clearer idea of the future direction of commodity prices and the global economy as a whole.

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

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Daily Commodities Fundamentals: Commodities Close Lower to End Week

North American Commodity Update, Last Updated 8/7/2009 5:19 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Fall on U.S. Dollar Strength

Crude Oil (WTI)   $70.420                         -$1.500                             -2.09%
Crude traded lower after a choppy day of trading, losing roughly 2% by the session’s close. Today’s main market mover was the US Non-Farm Payrolls report, which led to a swing towards risk appetite but also a strengthening of the US dollar. The NFP revealed a loss of 247K jobs last month, a dramatic improvement when compared to the 328K analysts expected. The US unemployment rate actually fell from 9.5% to 9.4%; it was the first decline since April of 2008. The positive release out of the United States led to an impressive dollar rally. When the dollar gets stronger, dollar-denominated commodities like Crude lose. However, the better-than-expected NFP report heightened investor confidence, leading many to believe that the recession is over. If this is truly the case, demand for Crude would likely increase as the global economy begins to expand. Note that just Wednesday, the Department of Energy inventory figures showed a significant year-over-year decline in Crude demand, a threat to any sustainable economic recovery. It will be interesting to see what direction, if any, Crude prices take next week.

Department of Energy Inventories

Commodities – Metals

Precious Metals Retrace Slightly to End Week

Gold                   $956.900                           -$6.000                           -0.62%
Gold finished slightly lower today, leaving it nearly even over the past week at approximately $957-per-ounce. The reason for Gold’s decline today was certainly US dollar strength; the greenback closed higher against all of its major competitors (excluding the New Zealand dollar), specifically gaining over 2% on the Japanese Yen. As was the case with Crude, the US NFP report was the fundamental driving factor. Investors continue to regain confidence in the global economy, many of whom believing that the US will lead the world out of the recession. Gold losses were subdued today despite the dollar’s impressive performance because when speculators prepare for an economic recovery, inflationary fear sets in, helping to support Gold future prices. Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness/inflation. Expect Gold prices to increase next week due to heightened risk appetite and inflationary concern.

Silver                 $14.600                          -$0.045                          -0.31%
For the first time all week, Silver’s price move was less extreme than Gold’s. Silver future prices lost only 0.3% due to conflicting fundamental data that applied pressure on opposite sides of the metal. Usually, dollar weakness and risk appetite go hand-in-hand, leading to volatile swings in prices. In addition to serving as a precious metal, Silver also has an industrial application, which makes it particularly sensitive to a changing global economic outlook. Today’s better-than-expected US NFP report bid up the US dollar while still encouraging investors to re-enter higher yielding assets. Next week, the Bank of Japan and the FOMC are due for their interest rate decisions. Though they are both expected to maintain their respective key lending rates, the commentary that follows may provide some direction in the global marketplace, leading to changes in commodities.

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

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Daily Commodities Fundamentals: Commodities Open Week on a High Note

North American Commodity Update, Last Updated 8/3/2009 4:06 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Gain due to Chinese Consumption, European PMI Figures

Crude Oil (WTI)   $71.420                         +$1.970                             +2.84%
Crude Oil future prices shot up above $72-per-barrel during intraday trading, starting the new week by gaining an additional 3%. Crude prices begin climbing early on in Asian trading, as new reports emerged that Chinese consumption of Crude, which accounts for nearly 45% of all Asian consumption, had increased. Many analysts expect China to be the first country to successfully escape the global recession, so the country’s improved figure may be perceived as an indicator for near-term global growth. The European PMI figures exceeded expectations today, led by the UK number that reached 50.8. A reading above 50 actually indicates expansion as opposed to contraction; the reading had been below 50 since late last year. The PMI reports heightened risk appetite in the futures market, as any signal of near-term economic expansion will likely increase demand for Crude. However, recall that just last week, US Crude inventories were largely disappointing, leading to a substantial 6.5% decline in Crude future prices. If Wednesday’s new stockpile report reveals heightened demand for Crude, the market could see significant upside.

Department of Energy Inventories

Commodities – Metals

Precious Metals Push Forward Hit Recent Highs

Gold                   $959.300                          +$3.500                           +0.37%
Gold future prices reached a 2-month high today after closing up around $4 to $960. Prices increased marginally by 0.3%, significantly less than the gains realized by Crude and Silver. Widespread dollar weakness was most responsible for Gold’s increase today, as the greenback fell across the board (excluding the Japanese Yen). The Dollar Index appeared to experience a breakout during today’s trading, as numerous currencies (including the commodity-correlated Australian and Canadian dollars) hit new yearly highs. Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness. Fundamental data does not seem to be supportive of Gold’s increase of late, as inflation remains subdued and physical demand remains low. Regardless, as long as risk appetite remains, investors could choose to ignore the facts and extend the rally. If they become satisfied with the price increase, supports could falter leading to a significant retracement.

Silver                 $14.250                           +$0.310                            +2.22%
Although prices retraced slightly since reaching 7-week highs during intraday trading, Silver futures traded upwards of $14-per-ounce after adding nearly $0.300. Like Gold, the dollar’s weakness contributed to Silver’s gain, but other factors played in that led to the metal’s significantly more notable price increase (about 2.5% compared to Gold’s 0.3%). In addition to serving as a precious metal, Silver also possesses an industrial application that makes it more sensitive to positive industrial reports. As mentioned, the European PMI figures exceeded expectations and heightened risk appetite. The US ISM Manufacturing report also came in better-than-expected, which further advanced Silver future prices. Tomorrow may be another volatile day for commodities; The RBA’s rate decision is due overnight, along with Swiss CPI. At 8:30 AM EST, the US Personal Income and Personal Expenditure reports could be market-moving.

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

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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

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Daily Commodities Fundamentals: Crude Soars, Gold Slips, Silver Slightly Up

North American Commodity Update, Last Updated 7/23/2009 3:54 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Push Forward, Testing $69 During Intraday

Crude Oil (WTI)   $67.180                         +$1.780                             +2.72%
Crude Oil future prices saw significant gains today after encouraging fundamental economic data and corporate earnings were released. Crude reached levels near $69-per-barrel during intraday trading before retracing slightly back near $67, still over a 2.5% gain during the session. US Existing Home Sales, which exceeded expectations by 50,000, proved to be a significant market-mover for Crude prices. Less than an hour later, the Bank of Canada’s Monetary Policy Report provided extremely bullish sentiment in the market, stating that the recession would end this quarter.  The report came in conjunction with additional corporate earnings that exceed analyst expectations, led by AT&T and Ford. Equities all pushed higher as a result, with the Dow surpassing the psychological 9000 level for the first time since January. If Crude can hold strong through tomorrow’s session, it will have added over 10% since 7/10.

Upcoming Department of Energy Inventories

Commodities – Metals

Gold Stuck Near $950, Silver Gains Modestly

Gold                   $950.500                           -$2.800                           -0.29%
Gold future prices did not perform as well as expected today, trading generally sideways yet again. During today’s session, Gold hit a 6-week high immediately following the surprising fundamental data releases. However, the metal could not hold onto its gains, falling from near $957-per-ounce back to around $952, marking a slight decline on the day. For weeks, Gold has been trading inversely with US dollar strength as investors waver between risk aversion and risk appetite. The reason for Gold’s standstill is two-fold; the US dollar was mixed across the board today, beating safe-haven currencies like the Yen and the Franc but losing badly to the Canadian dollar. Additionally, recent inflationary reports have signaled that price growth has been controlled; Gold usually thrives upon inflation concern, as investors use the metal to hedge.

Silver                 $13.770                    +$0.070                          +0.51%
Silver future prices continued to pass higher today, adding another modest gain to what’s becoming an impressive run for the metal. Dollar weakness was not the driving force behind Silver’s gain today; rather, the prospect of a global economic recovery led to a bid up of the dually useful metal. As mentioned yesterday, the UK Retail Sales figure had potential to be market moving today. The release was just one of numerous fundamental data reports that contributed to Silver’s gain today, as US Existing Home Sales and the Bank of Canada’s Monetary Policy also propped up Silver future prices. Tomorrow could end another successful week for Silver; since 7/10, Silver has added nearly 9%.

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

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Daily Commodities Fundamentals: Commodities Trade Lower On Dissapointing Economic Releases

Commodities – Energy

Crude Prices Fall As Data Suggests Continued Global Contraction
Crude prices declined for the day as economic releases from the US and Europe pointed to further economic contraction. US Consumer confidence fell to 49.3, significantly lower than the expected 55.3, underscoring the difficult condition of the labor market. Spending will remain weak as consumers worry about job prospects. In turn this will weigh in on overall economic activity and reduce crude demand.  With crude supplies remaining at very high levels, this should provide significant downward pressures on prices. On the other hand, most of these selling pressures will be offset by dollar weakness as crude is a dollar-denominated asset. Since US government deficits remain at record levels and will likely remain so for some time, the US dollar will likely remain at lower parity to its major pairs for some time. So long as this continues, the push and pull between these factors will likely keep crude prices ranging between major resistance levels of $65 and $73 with higher levels of volatility for the near-term.

Crude Oil (WTI)   $70.070                              -$1.400                             -1.99%

Commodities – Metals

Safe-haven Metals Decline As Dollar Gains, Fundamentals Still Point To Gains?

Gold                   $927.450                           -$13.200                           -1.40%
Gold prices finished the session modestly lower as the US dollar gained against its majors. Fundamentals indeed stand in favor of further gains for the near to medium term but the metal will likely remain rangebound until a more solid view of economic direction is established. Inflationary pressures, though currently subdued, will likely emerge once a recovery takes hold. The US dollar will also remain subdued against its major counter-parts for some time and boost prices. Expect gains for the near to medium term.

Silver                 $13.5800                   -$0.3950                           -2.83%
Silver futures were declined for the day on the negative economic data. Prices will rise if safe-haven metals gain, but due to its industrial applications, economic weakness will mute gains somewhat. On the other hand, if signs of recovery are released, silver will gain at a much faster rate than gold for the same reason. Expect modest gains for the near-term.

-Written by Stefan Tifigiu and Jay Steinberg, CFDTrading Research
Questions/Comments about this article? Send them to Stifigiu@fxcm.com, Jsteinberg@fxcm.com

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Daily Commodities Fundamentals: Crude Continues To Range, Safe-Havens May Be Poised For Further Gains

Commodities – Energy

Crude Prices Fall Despite Large Stockpile Decline And Positive Durable Goods Data

Crude Oil (WTI)   $69.340                              -$0.890                             -1.27%
Crude prices remain fell for the session as savings gains hint that consumer spending will ikely diminish in the coming months. Fundamental influences exist that can both support and deflate current prices. Stockpiles will remain high as lower crude demand couples with continued production from OPEC countries. However, the prospect of lower spending will come as a double edged sword since on the one hand, lower demand should keep prices lower, while on the other lower spending will likely lead to further economic weakness and force the government to maintain deficits at record levels for some time. This will continue to weigh in on dollar pricing and effectively buoy prices somewhat for the medium term. Add to this political tensions that will disrupt (albeit minimally) supply from various countries and you will continue to have support for higher crude prices. While supply disruptions would have a minimal impact on the already large crude stockpiles, the disruptions will still have an effect on prices. In turn, the push and pull between these factors will likely keep crude prices ranging between major resistance levels of $65 and $73 with higher levels of volatility for the near-term.

Commodities – Metals

Safe-haven Metals Gain Despite Dollar Gains, Sign Of Turnaround In Sentiment?

Gold                   $940.200                           +$0.700                           +0.07%
Gold prices finished the session modestly higher despite dollar declines. The lack of movement may come as Gold prices approach resistance levels that have been hit over four times in the past month and have only been broken through once.  Fundamentals indeed stand in favor of further continued gains for the near to medium term. Inflationary pressures, though currently subdued, will likely emerge once a recovery takes hold. The US dollar will also remain subdued against its major counter-parts for some time and boost prices. Expect gains for the near to medium term.

Silver                 $14.1050                         +$0.0730                          +0.52%
Silver futures were flat for the day despite the positive data. Prices will rise if safe-haven metals gain, but due to its industrial applications, economic weakness will mute gains somewhat. On the other hand, if further signs recovery are released, silver will gain at a much faster rate than gold for the same reason. Expect modest gains for the near-term.

-Written by Stefan Tifigiu, CFDTrading Research
Questions/Comments about this article? Send them to Stifigiu@fxcm.com

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Daily Commodities Fundamentals: Crude Prices Slip Despite Data In Favor Of Gains, Metals May Be Poised For Further Gains

Commodities – Energy

Crude Prices Fall Despite Large Stockpile Decline And Positive Durable Goods Data

Crude Oil (WTI)   $68.540                              -$0.700                             -1.01%
Crude prices remain inversely correlated to dollar gains with crude declining despite a sharp drop in stockpiles and positive Durable Goods data. Nevertheless while data was in favor of higher prices, numerous fundamental reasons continue to point to lower crude prices. Downward pressure comes from stockpiles near decade highs, lower crude demand, and maintained production levels by OPEC. On the other hand, dollar weakness, a resurgence in growth in some parts of the world, and political turmoil in major oil producer countries will provide some steam to buoy prices. Dollar declines are the largest provider of support to prices at current levels. While the dollar has continues to osscilate between losses and gains, the overall trend will likely remain at lower levels for some time. This comes as the effect of record government deficits will weigh in on the dollar. Given weakness in the economy, debts will be difficult to unwind without damaging a recovery. Meanwhile mounting violence and protests in countries like Iran threaten to disrupt supply chains. While these disruptions would more than likely be offset by the large amount of stockpiles on hand, turmoil will still likely be priced in and excacerbated by dollar declines. In turn, the push and pull between these factors will likely keep crude prices ranging between major resistance levels of $65 and $73 with higher levels of volatility for the near-term.

Commodities – Metals

Safe-haven Metals Gain Despite Dollar Gains, Sign Of Turnaround In Sentiment?

Gold                   $932.100                           +$7.800                           +0.85%
Gold prices gained modestly for the session despite dollar gains. This could be a sign of that steady losses in past sessions may have subsided.  Fundamentals indeed stand in favor of further gains for the near to medium term. Inflationary pressures, though currently subdued, will likely emerge once a recovery takes hold. Meanwhile record deficits juggled during a continued recession will likely keep the US dollar subdued against its counter-parts for some time and provide for higher prices. Expect gains for the near to medium term.

Silver                 $13.8950                   +$0.0190                          +0.14%
Silver futures were flat for the day despite the positive data. Price gains will likely slow if expectations for further economic contraction comes to fruition, but the lack of movement in prices today may be a sign that markets are unconvinced of the possibilities of a near-term recovery. Nevertheless, the metal has rallied considerably since the start of 2009 largely on expectations for such a recovery. If delayed, the metal could lose some of those gains. All the same, if safe-havens gain, this will still boost prices albeit more moderately. Expect modest gains for the near-term.

-Written by Stefan Tifigiu, CFDTrading Research
Questions/Comments about this article? Send them to Stifigiu@fxcm.com

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Commodities Daily Fundamentals: Commmodities Rebound On Dollar Weakness

Commodities – Energy

Crude Prices Fall As Expectations For Lower Demand Weighs On Prices

Crude Oil (WTI)        $69.210                              +$1.710                           +2.53%
Crude prices rebounded as the dollar sold off sharply for the day, While there are numerous fundamental reasons for crude prices to continue to decline, countervailing factors that will offset such these pressures. Downward pressure will come from stockpiles near decade highs, lower crude demand, and OPEC countries. On the other hand, dollar weakness, a resurgence in growth in some parts of the world, and political turmoil in major oil producer countries will push up prices. Dollar declines are the largest provider of support for prices at current levels. While the dollar has rebounded a few times in past few sessions, it will likely remain at lower parity to its counterparts for some time. Record government deficits that many point to as primary reason for the selloffs will be very difficult to unwind without adverse effects on an already weakened economy. Meanwhile mounting violence and protests in countries like Iran threaten to disrupt supply chains. While these disruptions would more than likely be offset by the large amount of stockpiles on hand, turmoil will still push crude prices slightly higher. In turn, the push and pull between these factors will likely drive crude prices to range between major resistance levels of $65 and $73 a barrel for the near-term.

Commodities – Metals

Safe-haven Metals Continue Declines On Dollar Strength, Muted Inflation

Gold                   $926.800                           +$5.800                           +0.63%
Gold prices gained modestly for the session as the US dollar fell against its majors. While gold prices have fallen substantially for the past few weeks, fundamentals continue to point to gains. Inflationary pressures, though currently subdued, will likely emerge once a recovery takes hold. Meanwhile record deficits juggled during a continued recession will likely keep the US dollar subdued against its counter-parts for some time. Both of these factors stand in favor of higher gold prices. Expect gains for the near to medium term.

Silver                 $13.8800                          +$0.1270                          +0.92%
Silver prices followed suit with gold. Prices gains will likely slow if expectations for further economic contraction comes to fruition. The metal has rallied considerably since the start of 2009 largely on expectations for a recovery and if that recovery is delayed the metal could lose some of those gains. Nevertheless, safe-haven gains will still boost prices somewhat. Expect modest gains for the near-term.

-Written by Stefan Tifigiu, CFDTrading Research
Questions/Comments about this article? Send them to Stifigiu@fxcm.com

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