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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

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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: 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

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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

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Daily Commodities Fundamentals: Crude Retraces, Metals Push Forward

North American Commodity Update, Last Updated 8/4/2009 4:05 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Retrace Slightly Due to Profit-Taking

Crude Oil (WTI)   $71.220                         -$0.360                             -0.50%
Crude Oil future prices fell marginally today, losing roughly 0.5% after adding nearly 13% during the previous three sessions. It is suspected that profit-taking is likely responsible for today’s slight decline, as investors who are satisfied with recent gains escape the market. The strategy is understandable; tomorrow’s Department of Energy Stockpile report will cause significant volatility, just as it did last week. Recall that last Wednesday, Crude future prices fell 6.5% after a disappointing US inventory figure that indicated continued weak demand. The concept of supply and demand remains a threat in the Crude market; investors have bid up Crude prices recently despite questionable fundamental support for such greenshoots. Propping up Crude prices during early trading was an encouraging report out of China indicating heightened demand for the commodity. Many expect China to be the first country to successfully emerge from the recession, so its increased demand may contribute to bullish sentiment. Regardless, the market will get moving at 10:30 AM EST when the inventory figures are released.

Department of Energy Inventories

Commodities – Metals

Precious Metals Push Forward, Extend Yesterday’s Gains

Gold                   $966.300                           +$7.500                           +0.78%
Gold managed to build on yesterday’s gain, adding another 0.8% during intraday trading. Recently, dollar strength/weakness has been the main reason for any Gold price action. However, today’s $7.700-per-ounce increase comes despite a slightly stronger dollar. After falling to new lows against nearly all of its major competitors, the dollar managed to build a minor retracement, but nothing substantial. It remains on the brink of a continued breakout, one that would only add to future price increases. Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness. Inflation has not been of much concern in the commodity market, as the global recession proves to be difficult to escape. Friday’s NFP report will provide a clearer picture regarding the health of the US economy, and in turn, the next direction for Gold prices.

Silver                 $14.560                    +$0.308                          +2.16%
As predicted, today marked another volatile day for Silver future prices. Silver gained an additional 2.3% during today’s trading session, marking a near 6% increase already this week. Silver’s notable gain was not due to dollar weakness or any inflationary concern; rather, specific fundamental data releases contributed to Silver’s ascent. In addition to serving as a precious metal, Silver also has an industrial application that makes it particularly sensitive to global economic growth indicators. For example, the US Pending Home Sales figure, which came in at 3.6% compared to an expected 0.7%, pushed Silver future prices higher. A rebound in the housing market is often a leading indicator of an economic recovery. Also having an impact was the US Personal Spending growth rate, which increased in the month of June by 0.4%, while US Personal Income fell by 1.3%. Overnight, UK Industrial Production figures are due, while at 10:00 AM EST, US Factory Orders for June will be reported. Both could be potentially market moving for Silver.

-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 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

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Daily Commodities Fundamentals: Crude Loses 6.5%, Leads Other Commodities Downward

North American Commodity Update, Last Updated 7/29/2009 4:20 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices Tank Amid Continued Demand Concern

Crude Oil (WTI)   $62.890                         -$4.340                             -6.46%
After adding nearly $10-per-barrel over the past two weeks, Crude Oil future prices plummeted straight through the psychological $65 level to close below $63. The 6.5% decline marks the biggest intraday loss for the commodity since mid-April. Crude’s descent continued from yesterday, picking up steam early in the US session following the release of a disappointing US Durable Goods Orders report, which showed a 2.5% pullback as opposed to the expected -0.6% change . Durable Goods, by definition, last over three years, so many investors use their growth rate as an indication of future growth. At 10:30 AM EST, the Department of Energy published its Crude Oil Inventory figure, which was the catalyst for today’s extreme price movement. Stockpiles increased by nearly 5.5 million barrels last week despite analyst expectations of a 1.5 million barrel reduction. Demand for Crude had already been week this summer, but investors had ignored this fact when bidding up future prices; the alarming figure from the DOE forced the market to succumb to the basic economic principle of supply and demand. Though slight retracements have been well-documented after such significant price declines the fundamental concerns remain; Crude could begin to fall back to mid-July lows and re-test $60 later this week.

Department of Energy Inventories

Commodities – Metals

Gold Slips, Silver Falls on Weak Day for Precious Metals

Gold                   $929.400                           -$9.700                           -1.03%
Relatively speaking, Gold prices held steady during today’s trading, losing only 1% intraday. After a new batch of disappointing fundamental data reports, the dollar began to climb against its major competitors as investors favored risk aversion. The prospect of a prolonged economic recession scared investors out of higher yielding currencies and muted any existing inflationary fears after last week’s encouraging global news. Recall that Gold and the greenback tend to trade inversely as investors use the metal to hedge against dollar weakness/inflation. As the CFTC hearings rage on, the broader commodity market may continue to suffer. Just as Gold did not see as substantial gains as Silver last week, it will likely withstand substantial losses as well.

Silver                 $13.295                          -$0.445                          -3.24%
Monday’s $14-per-ounce level for Silver future prices is certainly a thing of the past; continuing from yesterday’s decline, Silver slumped an additional 3.5% today. The US Durable Goods Orders report weighed on Silver future prices, as the prospect of a prolonged economic recession is becoming increasingly probably and may be confirmed by Friday’s US GDP report. Depressing fundamental data is taking control over future price speculation, especially amid the CFTC hearings as traders maintain a “wait and see” approach. Tomorrow’s German unemployment rate and Japan’s CPI report should be the main market movers for Silver, as investors will have new insight into the health of the global economy.

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

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Daily Commodities Fundamentals: Risk Appetite Drives Crude, Metals Higher

North American Commodity Update, Last Updated 7/27/2009 3:40 PM EST (GMT = EDT +5:00)

Commodities – Energy

Crude Prices End Slightly Higher, Testing $69 During Intraday

Crude Oil (WTI)   $68.300                         +$0.250                             +0.37%
Crude Oil future prices edged higher during today’s trading session, managing to close with slight gains after testing levels all the way up to $69-per-barrel. Early this morning, Crude soared on an extremely upbeat US Home Sales report, which showed an 11% increase compared to an expected 3%. Inventories were also the lowest they have been in over a decade. However, around the same time, disappointing earnings reports emerged from both Verizon and Aetna, causing Crude to pare its previous gains. As has been the case for weeks, investors seem to be ignoring the fundamental lack of demand for Crude when pricing the commodity; despite the extremely low demand, speculation continues to drive future prices higher. Further gains are certainly not out of the question, as any upbeat fundamental data will drive Crude higher.

Upcoming Department of Energy Inventories

Commodities – Metals

Silver Outperforms Gold on Good Day for Metals

Gold                   $957.500                           +$1.600                           +0.17%
Gold future prices spiked to nearly $962-per-ounce during the Asian trading session before falling back near opening levels near $956. Gold saw initial gains due to falling risk aversion; the US dollar was down across the board today (excluding the Japanese Yen) as investors flock to higher yielding currencies. The prospect of a global economic recovery led to a bid up of the Australian dollar in particular during today’s session. Gold and the greenback often trade inversely as investors use the metal to hedge against dollar weakness/inflation. It seems as if Gold futures are attempting to break away from the psychological $950 level, but the absence of a significant catalyst has muted any real gains.

Silver                 $14.025                               +$0.150                          +1.08%
For the first time this month, Silver future prices broke above the $14-per-ounce level before retracing slightly. Silver is currently trading above the $14 level, a result of heightened economic optimism. Positive fundamental data doubly affects the metal, which functions as both a hedge against dollar weakness and an input in industrial production. An encouraging US Home Sales report coupled with a better-than-expected German GfK figure calmed investors nerves resulting from poor corporate earnings today. Silver may fall back below $14 as investors take the opportunity to sell, but bullish fundamental data could serve as a support.

-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 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

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