Commodity Update 26 October 2012

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Commodities Trading: 26 October 2012

The falls towards the $1,700 mark managed to attract bargain hunters into the gold spread trading market yesterday, pushing for a rally of $8.3 to $1,709.8.

Whilst a dollar recovery could prove challenging in the short-term, and may even encourage another retracement in the near future, it takes a lot of courage to deny gold's long term potential.

Nymex crude oil prices rebounded $0.38 to $85.98, interrupting a string of four declines in a row, as we saw some better-than-expected jobless claims data.

There was also some speculation that the Bank of Japan might ease its monetary policy to spur growth, which should help the energy sector.

Nevertheless, the short-term trend remains bearish and the crude oil spread trading markets are already seeing a resumption of the downtrend this morning.



Commodities Trading: 25 October 2012

Gold closed at $1,701.0 yesterday, nearing its weakest level in around seven weeks, as the Fed boosted the dollars safe haven appeal by announcing its commitment to economic stimulus measures.

In early October, the gold market peaked at $1,790.1 as the Fed increased their monetary easing measures, but has since declined on a reinforced dollar and the release of relatively good global economic data.

Bargain hunters are eyeing a support level of around $1,700 and possible catalysts include a strong rupee in India, a big buyer of gold during the festive season.

A larger-than-expected build in US oil stockpiles, a 5.9 million barrel gain vs. 1.8 million barrels expected, was enough to send the price of US crude oil $0.96 down for the day to $85.59.

In addition, comments from the Federal Reserve about slow growth and high unemployment were not exactly encouraging, adding to the risk averse mood currently seen in the energy market.



Commodities Trading: 24 October 2012

Despite being perceived as a hedge against troubled times, gold lost yesterday's battle with the dollar as a safe haven asset.

Instead, because the two are inversely correlated, the precious metal joined the rest of the commodities spectrum, losing $21.4 to close at $1,707.2.

The prospect of a drop below the $1,700 mark might have limited the damage, however, as bargain hunters are already pushing for a rebound.

A significant plunge in the equity markets combined with a strengthening US dollar to easily weigh on the energy markets yesterday.

As a result, the price of WTI crude oil followed stocks lower, dropping $2.60 to $86.44, a new recent low.

In terms of crude oil analysis, the short and medium-term trends have both turned negative, highlighted by the bearish cross between the moving averages.

Can today's release of the US weekly oil inventories overturn that pessimism?



Commodities Trading: 23 October 2012

We saw a rally in the gold spread trading market yesterday, as bargain hunters came out from wherever they were hiding to push for a $9.3 gain to $1,728.7.

This rally was aided by news that Japan's exports had declined by 10%, fuelling renewed fears of a slowdown in the global economy.

In addition, although the US earnings remained strong overall, there were many warnings that future sales growth might struggle, sparking gold buying as a hedge against rainy days.

The US crude oil spread trading market extended its decline yesterday, reaching below the psychologically important $90 mark, closing $0.92 down at $89.10.

The catalyst was a report suggesting that a major North American oil pipeline will restart soon, boosting supplies.

Additionally, Japan announced a gloomy 10% drop in exports, casting further doubt on the global economic recovery and weighing on the energy sector.



Commodities Trading: 22 October 2012

Gold was not spared by the pessimism that engulfed global spread trading markets on Friday, dropping $18.9 to $1,721.9.

Signs that the Chinese economy is losing some steam had already caused some fears of a slowdown in demand for commodities.

In addition, a rebounding dollar and a US economy that remains on the back foot, also weighed on the precious metal.

A stream of gloomy corporate results for some of the most recognisable US brands sparked concerns in the energy sector regarding future oil demand.

As a consequence, US crude oil slumped $2.11 to $90.34, also dragged lower by fears that the European debt crisis is either deepening or, at best, going to take longer to sort out.

Matters were undoubtedly made worse by a sell-off in the indices spread trading markets and a slightly stronger US dollar.



Commodities Trading: 19 October 2012

Following a three day rally, the price of gold is now set for a second weekly decline.

The market closed at $1,741.2 yesterday, around 1% lower for the week, as improving US and Chinese economic data took the shine off the metal as a hedge against inflation.

Last year, gold hit an all-time high of around $1,921, however, since then a stronger dollar has dragged it down and prevented it from passing the $1,800 mark.

In energy market trading, a larger-than-expected rise in US jobless claims weighed on crude oil prices yesterday.

Nonetheless, the spread trading markets pushed for a rebound after reports that TransCanada Corp had shut a key pipeline going to Cushing, Oklahoma, the delivery point for WTI crude.

As a result, the price of WTI crude oil ended unchanged at $92.40, amid the same consolidation pattern seen for nearly two weeks.



Commodities Trading: 18 October 2012

Gold is trading steadily after seeing two days of gains and closing at $1,749.6 yesterday.

Investors are looking for a fresh catalyst to spark a gold rally, and so many will be watching as the Eurozone leaders gather for a two-day meeting in Brussels.

The gold market managed to shrug off data showing a slowdown in China for the seventh quarter running, and the precious metals relationship with the dollar is being watched closely.

Good sentiment in the Eurozone is supporting the euro and weighing on the dollar, making commodities like gold more attractive to holders of other currencies.

Yesterday saw two reports with precisely opposite effects that, by and large, kept WTI crude prices rather flat around the $92.50 mark.

On the one hand, the rise in US new home construction fuelled optimism that demand for energy will stay strong in the near future.

However, on the other hand, the Department of Energy indicated a larger-than-expected build in oil inventories, showing that the market is well supplied.



Commodities Trading: 17 October 2012

Gold posted a $10 rebound yesterday, closing at $1,749, on rumours that Spain is about to ask for financial help which could reduce some of the region's debt concerns.

The signal for that move was a shift in Germany's tone towards rescue funds for the Iberian nation. As expected, investors rushed into gold to preserve their assets.

Fresh news that Germany is easing its hard stance on a potential Spanish bailout was the trigger for a rise in risk appetite, with the energy market being one of the main gainers.

As usual, a higher equity market coupled with a weakening dollar attracted buyers, who pushed the price of WTI crude oil up by $0.21 to $92.40.

The rise was slightly less than those seen in other commodities, possibly because participants were on guard ahead of the weekly US inventories report due later today.



Commodities Trading: 16 October 2012

Better-than-expected Chinese export readings put a stop to speculation about additional economic stimulus and triggered a sell off in gold.

The selling continued for the entire session, aided by a slightly stronger dollar, with gold prices losing $16.5 to $1,736.8.

From a gold analysis point of view, the charts are now indicating a shift to the downside in the short-term trend.

Initially, US crude prices moved down on news that New York manufacturing is struggling.

However, a recovery in stock market indices changed the sentiment, dragging oil prices up as retail sales figures topped estimates.

Overall, it was only a marginal gain of just $0.19 to $92.21, with energy investors possibly waiting for further news from the Middle East before deciding on the next direction for oil prices.



Commodities Trading: 15 October 2012

After Friday's Chinese export figures exceeded expectations for September, the gold spread trading market fell to its lowest level in two and half weeks. This came as investors speculated that China may not need additional stimulus measures after all.

The precious metal closed at $1,754.2 and is extending the falls this morning. Stop-loss selling is more than offsetting support from Chinese inflation data, suggesting that we were inevitably going to see the brakes put on monetary easing.

This is not just the case in China, but also in the US, where data showed that consumer sentiment rose to a five year high, meaning that the Fed may be able to trim quantitative easing.

The price of Nymex crude oil fell by $0.63 to $92.17 on Friday, as the gloomy global economic outlook outweighed growing Middle East tensions and timid signs of improvement in the US economy.

However, oil prices rose over the week, indicating that the conflict between Syria and Turkey, on top of the Iranian nuclear program, is keeping energy investors nervous.

Without wanting to sound alarmist, investors should always be aware that such events have the potential to trigger a price spike at any moment.


By Simon Denham, 26 October 2012


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