Volatility cloud over commodities

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Aug 2010

The stage is set for an explosive comeback from summer holiday mode, and volatility is the byword as investors grow ever more fearful of double dip dangers. The mood on base metals is gloomy due to a close correlation between recently hobbled stock markets and worries about demand from China and the United States dominating market psychology.
Oil has similarly been pricing in a dip in the global economy. Gold, on the other hand, stands poised for its third significant upside assault, with fundamental and technical factors favouring a run to record highs. There's also the quiet assent of silver, which is riding on gold's coattails despite having a poorer fundamental story. Soft commodities have taken a knock in the downdraft of economy jitters, but internal fundamentals are ready to return to the fore. Data to watch include key US economic indicators for further signs of weakness in the world's largest economy. August non-farm payrolls data due Friday will be particularly closely watched, while minutes of the Federal Reserve's latest monetary policy meeting will be eyed tomorrow.
US growth revision
Oil, corn, coffee and base metals like copper, along with many other commodities, posted sharp gains on Friday, lifted by a revision to US growth that was not as severe as anticipated and following comments by Fed chief Bernanke that calmed fears of double-dip recession.
Among the gainers were oil, which rose for a third straight day, coffee surged 3.7 per cent, copper set its highest close in 3 weeks, and corn also rallied to a three-week high.
The RJ/CRB index of 19 commodities surged to its highest level since last Monday at 267.40. The global benchmark settled with a 1.22 per cent rise to 267.27.
But not all markets were cheered by the glimmer of positive news in each of the big economic items for the day.
Gold, for example, trimmed early gains after Federal Reserve chairman Ben Bernanke said the Fed was ready to act to bolster flagging growth if needed. Some gold investors relinquished their need for a safe-haven investment.
Gold's modest rise by the end on Friday contributed to a fourth straight week of hikes, as a slew of weak economic reports had kept investors, fearful of double-dip recession, buying for its appeal as a safety play.
US natural gas futures ignored the positive economic news altogether, driving the benchmark September futures contract to a fresh 11-month low, as moderating summer heat, lack of Gulf Coast storm threats, and concerns about growing supplies all conspired to send prices 4 per cent lower. Meanwhile, US oil prices rallied with equities as investors shrugged off a downward revision to second quarter US growth.

Source: Reuters