Central Banks Continue to Influence Commodity Prices

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Commodity prices are subject to rumor and monetary stimulus just like the currency markets. Last week, global markets suffered major disappointments, after the FOMC held rates and policy, the BoE held rates and policy and the ECB offered no assistance.

Earlier this week the RBA held rates and policy and the Bank of Japan is currently meeting and is expected to hold rates and policy.

Rumors continue to grow about the Peoples Bank of China, announcing a huge stimulus package, this seems to be more rumor then fact, although the Chinese Prime Minister continues to promise to do what is needed, echoing the words of Ben Bernanke and ECB Draghi.

On Thursday and Friday, China will be releasing its monthly economic data ranging from Trade Balance to Money Flow.

Fed watchers are already predicting the outcome of the September 13th FOMC meeting in Jackson Hole.

Boston’s Fed Bank President Eric Rosengren said that the Fed should launch another bond buying program of whatever size and duration if necessary to get the economy back on its feet.

Gold traded in a narrow range on Tuesday with much lighter volumes than average for the second consecutive day as investors were uncertain about whether central banks would act to stimulate economies.

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,254.94 tons, as on August 3. Silver holdings of iShares silver trust, the largest ETF backed by the metal, declined to 9,742.43 tons, as on August 6. 

The dollar index, which measures the US unit’s performance against a basket of six major rivals, traded at 82.280, down from the day’s high of 83.397, but up from 82.175 on late Monday.

Copper futures rose for the third-consecutive trading session, supported by on gains in equities, decline in dollar and expectations grew that Europe will take the necessary steps to resolve its debt crisis and shore up their economies.  Copper futures for Sept. delivery closed higher by 1.5% at $3.4405 per pound on the COMEX of the New York Mercantile Exchange. 

Crude oil prices jumped to a 12-week peak, on falling North Sea output and supported by expectation of more bond buying by the US Federal Reserve while Middle East tensions continues to under-pin prices.

The second hurricane of the Atlantic storm season threatened Mexico and a fire damaged California’s second-largest refinery, supportive to oil futures.  Brent’s premium to US crude was pushed back above $18 per barrel.  Crude inventories fell 5.4mn barrels, Gasoline stocks rose 417,000 barrels and distillate stocks rose 2.4mn barrels, as per API report. The report due later today from the EIA expected inventories: Crude oil -0.3mn barrels, Gasoline -1.1mn barrels and Distillate +0.6mn barrels.

Natural gas futures closed higher for the second straight session, backed by buying ahead of Thursday’s weekly inventory report and slightly warmer revisions to extended weather forecast

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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