DJIA

U.S. Equities Close Near 12-Week High as Investors Await Results of FOMC Meeting

U.S. Session Key Developments

•    Speculation Arising that Fed May Introduce Another Round of Quantitative Easing
•    No data releases for U.S. Leaves Room for Recovery Optimism

U.S. Equities Close Near 12-Week High as Investors Await Results of FOMC Meeting

U.S. equity markets built on last week’s rally on Monday, with each index pushing further into positive territory for 2010. The NASDAQ gained the most, up three-quarters of a percent, while both the DJIA and S&P gained approximately one-half of a percent. The three indices are now at levels not seen for the past 12-weeks, as significant rallies by the Pound, Euro, and commodity currencies have exhibited renewed investor confidence in financial markets. Although some economists believe that the recovery is slowing, as evidenced by slowing factory orders, and an expected increase in U.S. Wholesale Inventories, sentiment is gathering that as long manufacturing and service indicators continue to show signs of expansion, growth will be sustained, and earnings will be boosted in the remaining months of 2010. The DJIA is now up 2.60 percent on the year, while the S&P and NASDAQ are up 1.14 percent and 1.61 percent, respectively.

Going forward, tomorrow could prove volatile as a flurry of U.S. economic data will be released during the Tuesday session. Nonfarm Productivity data for the second quarter is expected to show an increase, up 0.2 percent, though down from the 2.8 percent reading previously. IBD/TIPP Economic Optimism, a measure of small business confidence, is expected shortly after the session open. The Federal Open Market Committee Rate Decision, though expected to hold the key interest rate at 0.00-0.25 percent, will likely provide the greatest amount of event risk in the session. Although no change in rate is anticipated, investors are interested in the FOMC’s rhetoric going forward; it is expected that the Federal Reserve may expand stimulus for some time. Finally, in what is typically held lightly due to its release after the market close, the ABC Consumer Confidence reading for the period of August 8 will be announced at 17:00 EST. Currently, Confidence sits at -50.

DJIA 30                     10,698.75                      +45.19                       +0.42%

The Dow Jones Industrial Average gained 45.19 points, or 0.42 percent, during intraday trading to close at 10698.75. After opening nearly 40 points higher, the index entirely retraced its early move within the first 30 minutes of the session before advancing steadily to close just below 10700. The DJIA 30 was led by Cisco Systems, whose share price added 2.78 percent to close at 24.76. Hewlett-Packard was the worst performing company listed as part of the Dow; HP’s shares lost an astounding 8.01 percent following the announcement that Chief Executive Mark Hurd would be leaving the company in the aftermath of recent sexual harassment allegations. The company’s share price is testing its 52-week low of 41.94, ending the session trading at 42.59.

S&P 500                       1,127.78                        +6.14                         +0.55%

The broad-based S&P 500 finished up 6.14 points, or 0.55 percent, to close at 1127.78 after Monday’s trading session. The S&P now sits at its highest level since May amid speculation the FOMC might introduce new quantitative easing measures to stimulate growth at its meeting tomorrow. All ten of the index’s sectors posted gains today, with the telecommunications and consumer services sectors outperforming the rest. Sprint Nextel led the way, gaining 2.92 percent intraday to close at 4.58. Shares of Sprint have gained over 25 percent year-to-date, making it one of the top performing companies listed on the S&P 500.

NASDAQ                     2,305.69                       +17.22                       +0.75%

The NASDAQ outperformed its American counterparts on Monday, adding 17.22 points, or 0.75 percent, to close at 2305.69. The tech-based index has been unable to hold on to its gains beyond the significant 2300 level in recent weeks, but a breakout may be on the horizon (see below). Shares of Research in Motion (RIMM) surged following an announcement the company would cave to Saudi Demands regarding its privacy policy. The company saw its share price gain 3.50 percent intraday to close at 55.32.

Written by Jay B. Steinberg and Christopher Vecchio, CFD Trading Analysts
For Questions/Comments, please contact him at JSteinberg@fxcm.com

DJIA

U.S. Equity Markets Closed for President’s Day

Today’s Session Key Developments

•    European Union Officials Pressure Greece to Take More Measures to Cut Debt
•    Precious Metals Trade Higher, Greenback Rises Against European Counterparts

U.S. equity markets were closed today for the President’s Day Holiday.  Although stock prices were unchanged, the U.S. Dollar posted gains against its European counterpart for an eighth time in the last nine days.  Today, the exchange rate fell below $1.36 per euro for the first time since May 2009.  Investors remained pessimistic regarding the debt situation in Greece and concerned that the problems may spread into other nations.  European Union economics officials told Greece leaders that more steps need to be taken to reduce the country’s budget deficit.  Despite the concerns, European equities managed to close higher thanks to rising commodity prices and better-than-expected earnings reports.  As for U.S. markets, there is no major economic data released tomorrow to drive investor sentiment, but fourth quarter earnings will be released for Abercrombie & Fitch, Qwest Communications, and Teva Pharmaceutical.

DJIA 30                      10,099.14                      –.–                             -.–%

S&P 500                       1,075.51                       –.–                            -.–%

NASDAQ                       2,183.53                       –.–                            -.–%

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

DJIA

US Stocks Pare Gains at Close on Spending Concerns; Wells Fargo Downgrade

U.S. Session Key Developments

•    Crude Rallies to New High on Inventory Report
•    Market Falls in Final Hour on Wells Fargo Downgrade
•    Beige Book Shows Improvements

US Markets fell sharply in the final hours of trading as spending concerns in the Fed’s Beige Book, coupled with a cut to “sell” for Wells Fargo by Rochdale analyst Dick Bove, led to weakness across the board. The Federal Reserve’s report on economic developments in the twelve districts showed manufacturing and residential real-estate leading gains, while lending remained weak and consumer spending has yet to show substantial recovery. Retailers in several districts do not expect sales to rise sharply in the final quarter of the year, and a weak lending environment may indeed be a sign of a shift in consumer spending habits. While earnings reports from firms including Yahoo, Morgan Stanley and others have proven favorable to traders today, the overall picture remains clear: With stocks more than 50% off their lows, and the NASDAQ composite up 36% year-to-date, equities have run a tight upward trend with small retracements along the way. However, contractions may be limited in the future, just as in the past, as confidence remains high and sidelined cash remains ready to fill in the dips. The months ahead may prove to be optimistic as seasonal sales are likely to boost retailers while recovery in M&A activity amid fewer job losses could propel stocks higher.

DJIA 30                      9,949.36                   -92.12               -0.92%
The Dow ended the day below 10,000 for the first time in three sessions as nearly all sectors fell with financials down nearly two percent. The drop came amid a downgrade to Wells Fargo as it becomes clear that recovery will not lead to winners across the entire sector. Rochdale analyst Bove downgraded the bank, while citing lower taxes and mortgage servicing fees as involved in nearly 30% of the breakout profit reported by the lender. Also dropping from recent highs were JPMorgan and Bank of America, down approximately three percent each. Despite breaching psychological resistance in the recent week, the Dow may have more room to drop following a rally of 25% since early July.

S&P 500                     1,081.40                   -9.66                 -0.89%
The broad S&P500 saw a fall of nearly as much as the Dow as weakness in Financials and Consumer Services led stocks lower. Major movers on the index included banks, with Wells Fargo tumbling 5.12% following a downgrade to “sell” at Rochdale Securities. Other losers outside the financial sector included Walmart, down 2.07%, and a 2.9% drop in Pfizer. Ultimately, a bit of divergence was noted as firms which reported strong earnings managed to close higher. Morgan Stanley and U.S. Bancorp ended higher with gains of 4.8% and 2.65%, respectively, while Apple also climbed 3.1%. Profit taking or panic selling as it may be, optimism remains high and may not lead to a significant pullback.

NASDAQ                    2,150.73                    -12.74             -0.59%
The technology-heavy NASDAQ saw a fall of just over half-of-one percent as two stocks fell for each that gained, while the tech sector closed little changed. Major movers included Apple, up 3.1% on strong earnings, along with a nearly 1% gain in Microsoft as Windows 7 nears release. Pent up demand during the recession may lead to a resurgence in sales for tech companies. Many have rallied immensely off their lows in such anticipation and it remains no sure bet that further upside is high. With a move of more than 70% off its early March bottom, and the highest performance of the three major indices year-to-date, the NASDAQ remains a questionable bet going forward. At the same time, the index may not fall as severely as its counterparts could as many of the giants making up the composite are well positioned in terms of low debt and global sales.

Notable US Event Risk / Economic Releases

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com

DJIA

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

DJIA

Daily Commodities Fundamentals: Commodities Advance Following Euro-Zone GDP, Dollar Weakness

North American Commodity Update, Last Updated 8/13/2009 4:03 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Finishes Higher but Falls From Intraday Peaks

Crude Oil (WTI)   $71.010                         +$0.850                             +1.21%
Crude Oil future prices remained higher at day’s close despite falling significantly from intraday highs. The market for Crude had already been rather bullish following yesterday’s FOMC report; in its statement, the committee hinted that we are seeing a much slower rate of economic contraction and perhaps a turnaround in the near-term future. Future prices managed to surpass the $72-per-barrel level following the Euro-Zone GDP report – the EZ reported a 0.1% contraction for the 2nd quarter, a figure that exceeded the expected 0.5% contraction and last quarter’s 2.5% pullback. Speculators interpreted the report as a leading indicator for heightened Crude demand as the region escapes the prolonged economic recession (note that the IMF has forecasted the Euro-Zone’s recovery to be at a far slower pace than the United States). The commodity could not hold onto its gains through the US session, as prices fell back significantly following the US Advanced Retail Sales figure. Analysts had predicted a growth in retail sales by 0.8% only to find that, in reality, sales actually shrunk by 0.1%. the disappointing result is likely due to the expiration of government stimulus programs, removing a main source of disposable income for American consumers. Crude future prices should remain relatively stable tomorrow due to a shortage of market-moving fundamental data releases.

Department of Energy Inventories

Commodities – Metals

Gold Manages Slight Gain While Silver Wins Big

Gold                   $956.700                           +$4.200                           +0.44%
Gold future prices pushed higher during intraday trading, gaining an additional $4 to reach the $956-per-ounce level. A strong Euro-Zone GDP report coupled with a weak US Retail Sales figure did not bode well for the greenback, which lost against all of its major competitors (most noticeably to the high-yielding Australian and New Zealand dollars). Because Gold is a dollar-denominated commodity, it has historically traded inversely with the greenback as investors use the metal to hedge against dollar weakness/inflation. Yesterday’s BOE Quarterly Inflation Report and the FOMC’s statement both pointed towards low levels of inflation, which had temporarily applied downward pressure on Gold future prices. As we predicted yesterday, risk appetite/aversion guided the Gold market and will likely continue to do so barring any exceptional fundamental release or technical breakout.

Silver                 $14.970                          +$0.385                          +2.64%
Silver was the big winner during today’s trading session, testing the psychological $15-per-ounce level by adding another 2.5%. Price action happened early following the Euro-Zone’s GDP report and was sustained throughout the US session despite the disappointing Retail Sales figure. In addition to serving as a precious metal, Silver has its own industrial application that makes its price particularly sensitive to any changes in the global economic outlook. Within the EZ, both Germany and France had specifically encouraging GDP reports that showed QoQ growth by 0.3%. We could see moderate Silver price action tomorrow following the Euro-Zone and United State’s CPI reports. The US is also set to release July’s Industrial Production figure, but it will likely not be ultimately market-moving.

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

DJIA

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

DJIA

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

DJIA

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

DJIA

Daily Commodities Fundamentals: Crude and Gold Trade Sideways, Silver Falls

North American Commodity Update, Last Updated 8/6/2009 3:50 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Pares Early Losses, Ends Near Even

Crude Oil (WTI)   $71.920                         -$0.050                             -0.07%
Crude Oil future prices closed nearly even today after paring more significant losses that had tested the psychological $70-per-barrel level. Prices began their initial descent right before the US trading session began, when both the Bank of England and European Central Bank released their Interest Rate decisions. Though neither bank decided to adjust its key lending rate, the meetings did have very differing results. Jean-Claude Trichet of the ECB expressed a sentiment of guarded optimism, hinting that a recovery is on the horizon. The Bank of England, however, decided to extend its Asset Purchase Program by an additional £50B, which indicated that the UK remains in a period of financial turmoil. The fear of a prolonged economic recession drove down Crude future prices by nearly $2. Also putting pressure on Crude was a weaker equity market in anticipation of tomorrow’s US Non-Farm Payrolls report. Risk aversion took control as investors await a clearer signal regarding the health of the global economy. Expect tomorrow to be a volatile day in the Crude market leading into the weekend.

Department of Energy Inventories

Commodities – Metals

Gold Trades Sideways, Silver Loses

Gold                   $965.600                      -$0.700                         -0.07%
Gold future prices also traded flat by the day’s close despite a volatile US session. Gold prices had peaked above $974-per-ounce before completely retracing and falling all the way down to near $958. The US dollar was stronger across the board, making it difficult for Gold to sustain any gains. Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar inflation and/or weakness. During tomorrow’s trading, Switzerland, Canada, and the United States all release their respective unemployment rates. These figures will likely guide the market, determining whether or not investors will return to risk aversion remain generally bullish on the global economy forecast.

Silver                 $14.575                        -$0.185                            -1.25%
As has been the case for weeks, Silver futures have proved to be much more volatile than Gold futures. Whereas Gold remained even on the day, Silver lost over a full percentage point as risk aversion dominated the marketplace. Silver’s industrial application, in addition to its function as a precious metal, makes the commodity particularly sensitive to any news regarding the global economic outlook. The commentary surrounding the two interest rate decisions likely contributed to Silver’s decline, as investors remain wary about the prospect of a near-term economic turnaround. Traders flocked en masse to the relatively safe US dollar in anticipation of tomorrow’s fundamental data releases.

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

DJIA

Daily Commodities Fundamentals: Commodities See a Choppy Day of Trading

North American Commodity Update, Last Updated 8/5/2009 4:45 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Retrace Manage Slight Gains

Crude Oil (WTI)   $71.830                         +$0.570                             +0.57%
Crude Oil future prices managed to close higher after a choppy day of trading. Crude opened the day on a high note as the Asian markets internalized the encouraging fundamental US data from the day before. Soon thereafter, the United Kingdom released its own Industrial Production report that pointed towards economic expansion, a good sign for Crude bulls. However, Crude fell nearly two dollars following the release of the Department of Energy stockpile figures. Crude Oil inventory were expected to climb by 600K barrels, when in reality, it climbed by 1670K barrels. Gasoline inventory fell by less than expected; Distillate inventory fell despite an anticipated increase (see below). The report showed that despite the recent bid up of future prices, demand for the commodity still remains weak. OPEC has hinted towards a decrease in output for the month of September as a result. Though it was predicted that a disappointing report like this one would lead to a reversal of Crude’s recent upswing, prices pushed even higher. Investors seem to be confident that the global economic recession is coming to a close and as a result, consider today’s Crude cheap.

Department of Energy Inventories

Commodities – Metals

Precious Metals Near Flat, Waiting for Direction

Gold                   $967.300                           -$2.400                           -0.25%
Gold future prices remained mostly flat during today’s trading session, failing to establish a new direction for the remainder of the week. Though nothing too extreme, the dollar was mixed against the major currencies today, beating the Australian and New Zealand dollars but losing most to the British Pound, the outperformer on the day due to their encouraging Industrial Production report. The majors continue to float around YTD highs against the dollar; a catalyst could determine whether or not the dollar breakout from Monday is sustained or retraced. Expect the Bank of England and European Central Bank’s Interest Rate Decisions to indirectly impact risk sentiment and the US dollar, which will in turn, swing Gold future prices.

Silver                 $14.750                    +$0.055                          +0.37%
Silver future prices remained mostly flat also on the session but ended higher on the day. The UK Industrial Production report had pushed Silver higher during early trading, but poor fundamental data from the world’s largest economy pared any gains. In the US, Factory Orders fell by more than expected (not completely surprising after last week’s Durable Goods Orders figure). The ADP Employment Change also came in worse than expected; this report is often considered a precursor for Friday’s NFP report, which will be a market mover for commodities.  Volatility may arise in the Silver market before Friday however, as tomorrow’s interest rate reports may provide future direction for prices.

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

Next Page »