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Commodities Stabilize after Correction
Mon, Jan 25 2010, 04:40 GMT
Gold price rebounds after falling to as low as 1081.9 Friday (slightly above2.5-month low at 1075.2) as the dollar is expected to weaken ahead of a busy week in the US. Currently trading at 1110, the yellow metal had experienced steep correction over the past 2 weeks, losing more than -4%. Others in the precious metal complex also stabilized after the sharp falls last week. Silver bounced back to 17.15 after closing below 17 Friday, the first time since January 4. PGMs rebound more strongly as boosted by strong investment demand and robust fundamental outlook. Platinum surged +1.3% to 1565 in Asian session after plunging to a s low as 1521 last Friday. Palladium changes little from last week’s close, but the metal’s +3.5% rebound to 440 after sliding to 425 in NY session Friday indicated underlying strength.
Energy prices stabilized after the selloff last week. However, risk remains to the downside in the near-term. While demand is subdued in the US and other OECD countries, growth in China may slow down as the government steps up monetary tightening. Investors are not convinced to see oil prices higher amidst uncertainty. Currently trading at 74.5, WTI crude oil price is unlikely to rally to 80 again this week. While some OPEC members claimed that compliance level is adequate, Shokri Ghanem, chairman of Libya’s National Oil Corp said that OPEC nations must improve compliance with output quotas to prevent oil prices from further downward pressure.
The dollar index, a gauge benchmarking USD against 6 major currencies, changes little today after rising +1.2% last week, However, the index is expected to weaken as the focus has turned to US economy and monetary policy this week.
We will see updates of a series of important indicators in the world’s largest economy this week. Later today, the US existing homes sales probably declined -8.3% mom to 6M units in December after rising +7.4% a month ago. On Tuesday and Wednesday, the FOMC members will discuss about the monetary policy outlook but should decide to keep the Fed funds rate unchanged at 0-0.25%. However, policymakers’ tone on exit strategy and economic outlook is crucial. On Friday, 4Q09 GDP will be released and should have expanded +4.5% qoq after a +2.2% growth in the prior quarter.
Net speculative long positions slid to 134.4Kcontracts in the week ended January 19 as price retreated below 80 as weather was forecast to turn milder in coming weeks. Net longs may decline further as capitals flew out of the sector amid Obama’ bank proposal to curb risk-taking
Net speculative short positions rose further to 168.7K contracts. Net shorts may drop in the coming week as gas storage declined below 5-year average
Net speculative long positions slipped to 221.5K after a brief recovery last week, despite rebound in price
Net speculative long positions in silver dipped to 443.1K last week. Although net longs have dropped, they remain at historic highs. There’s risk of further decline in the coming week as price was heavily sold down
Net longs retreated further to 19.4K contracts despite price rally. Capitals might have been driven to the newly launched US platinum ETF. In the long-term, strong fundamentals in platinum should drive investments higher