Commodities Continue to Soar on Hopes of Stimulus

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With the US and Canadian markets closed for the Labor Day End of Summer Holiday, expectations for a quiet low volume day, were anything but. Commodities continue to soar, even with the COMEX and the NYMEX closed and US traders on holiday.

Gold rose to its highest level in more than 5-months, as lackluster manufacturing data from around the globe fanned speculation of imminent easing measures from central banks. Gold is trading this morning at 1693.65 and continuing to climb

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,289.52 tons, as on August 28. Silver holdings of iShares silver trust, the largest ETF backed by the metal, declined to 9,721.33 tons, as on August 30.

Moody’s Investors Service changed the outlook on its Aaa rating for the European Union to negative, warning it might downgrade the bloc if it decides to cut the ratings on the EU’s four biggest budget backers: Germany, France, Britain and the Netherlands. Although, the ECB’s President Mario Draghi told European lawmakers on Monday that purchases of short term sovereign bonds by the European Central bank would not breach European Union rules, The Euro strengthened against global currencies, after ECB president Draghi told European lawmakers, that he is open to the central bank buying government bonds on the secondary market. The German Constitutional Court will issue a ruling on the legality of the EFSF and the ESM on September 12, 2012.

The ICE dollar index, which measures the US unit against a basket of six major rivals, slipped to 81.172 from 81.242 in North American trade on late Friday. With US markets closed for the labor day holiday the DX moved on global sentiment and the outlook and interpretation of Mr. Bernanke’s speech.

Copper futures rose to a one-week high on Monday as weak factory data from China, worries over US jobs growth and Europe’s debt crisis strengthened expectations, that central banks and policy makers in the three regions will take action to boost economic growth.

Copper futures for Sept. delivery closed slightly lower at $3.4405 per pound on the COMEX of the New York Mercantile Exchange. LME lead stocks have dropped by almost a third over the past 2-weeks, and this could trigger a spike in short-term prices in September.

Lead stocks have slumped by around 92,000 tons or 32 percent, since Aug. 13 and half of those draw downs are due for delivery out of Singapore.

Crude oil futures closed on positive on Monday, as investors focused on the possibility of more stimulus measures and other moves to try to revive economic growth while traders ignored Chinese data, which showed a deepening slowdown in the world’s biggest energy consumer. Japan reported that for the first month, it did not import any crude oil from Iran. Crude oil dipped a bit on profit taking but recovered quickly, trading more on hope and dreams of monetary stimulus from China, the US and the ECB. Crude is trading this morning at 97.14 as rumors of strategic reserves once again begin to make the news. Last week Spain and Italy both stated that they were against any release of reserves.

The big event this week will be the much awaited announcements from Mr. Draghi due on the 6th. Markets are anticipating a big show, but Draghi and the EU have been known to oversell and then disappoint markets, which would see commodities tumble.

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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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