Spot gold climbed to a fresh all-time high of $1,246.47 per troy ounce on Monday, when investors euphorically reacted to weekend news about China allowing the renminbi to become a more flexible currency. The prospect of an increase in China’s purchasing power initially sparked a broad rally across equities and commodities. Gains were pared toward the end of the day, however, following a cautious reassessment of China’s announcement. Although a flexible exchange rate is a step in the right direction, key details were left out, casting doubt over China’s willingness to let its currency appreciate to a level that could meaningfully bolster export demand in the West. Even if China allowed the renminbi to appreciate, would Chinese demand be as strong as we really expect? Would it be sustainable? I think China would have to introduce additional policies aimed at stimulating domestic growth together with its flexible exchange rate policy. This may convince the market that the country has a strong and sustainable foundation for correcting global economic imbalances. Weaker-than-expected US housing data and physical demand from Exchange Traded Funds (ETF’s) have also supported gold. Holdings in New York’s SPDR Gold Shares rose by 5.17 metric tons to a new record high of 1,313.135 metric tons as of Tuesday, while a separate report by Bloomberg showed that global holdings of the metal by ETF’s climbed 6.2 metric tons to 2,050.6 tons on the same day. The introduction of new ETF’s and physical demand from central banks is likely to continue to support the price of gold as well. ‘Fiat-currency concerns relating to the European sovereign-debt crisis and excess liquidity should be positive for gold’ this year, said Morgan Stanley in a report on Wednesday. [1] Anthony Grech, London
July Natural Gas Chart (24/06/10 12:00)
Daily % Chg
-0.21%
3 months
11.15%
1 week
-7.13%
6 months
-15.66%
1 month
17.64%
1 year
-22.26%
Details
Prev close
4.804
52 week high
6.491
Last trade
4.794
52 week low
3.971
High
4.811
Low
4.782
Bloomberg Median Forecasts
Q1 2010
5.25
Q3 2010
5.20
Q2 2010
4.73
Q4 2010
5.75
Commentary
Natural gas traded at $4.794 per million British thermal units on Thursday morning, representing a 7.1% decline from last week’s update. Given the commodity’s robust performance, it is not surprising to see some profit taking; natural gas has outperformed most commodities over the past month, climbing over 17% over the period on speculation of a hot summer and on the view that the Gulf of Mexico oil spill will accelerate the US’ move to other forms of energy. On Wednesday natural gas rose for the first time in four days on the view that a heat wave along the US East Coast will raise demand for gas-powered electricity for air conditioning. Natural gas also rose on the back of news of a storm approaching the US Gulf Coast – a development that may disrupt gas supplies. The National Weather Service (NWS) on Wednesday revealed that a cluster of thunderstorms have extended from eastern Cuba and Jamaica to Puerto Rico and the northern Caribbean Sea. The NWS said the chance for the storm to develop further is (for the time being) moderate, however. It is important to monitor the potential for storms in the US Gulf of Mexico since the region produces around 11% of domestic gas output. Meanwhile, the US Energy Department’s weekly natural gas report is scheduled for release later today. According to Bloomberg, the report may show an 80 billion cubic feet rise in natural gas supplies last week, slightly lower than the five-year average increase of 85 billion. Gas storage gained 87 billion cubic feet to 2.543 trillion in the week ended June 11. Elsewhere, a Royal Dutch Shell executive on Thursday said that global gas demand is poised to increase by 25% over the next decade, despite uncertainty about the recovery of industrial demand. ‘Global gas demand will rise by one quarter by 2020… Of all primary sources of energy, natural gas is clearly the most attractive hydrocarbon’, said Shell’s De la Rey on Thursday. [2] Anthony Grech, London
July Copper (Comex) Chart (24/06/10 12:00)
Daily % Chg
1.33%
3 months
-11.57%
1 week
2.37%
6 months
-7.94%
1 month
-5.50%
1 year
24.82%
Details
Prev close
293.55
52 week high
369.10
Last trade
297.45
52 week low
217.25
High
300.60
Low
294.45
Bloomberg Median Forecasts
Q1 2010
325.00
Q3 2010
304.50
Q2 2010
313.00
Q4 2010
308.00
Commentary
The announcement that China would be more flexible in the valuation of the renminbi sparked a rally in July copper futures, helping the commodity gain nearly 2.4% on the week to $2.9745 per pound. The news led investors to speculate that China is preparing to allow its currency to strengthen against the US dollar, rendering copper, priced in US dollars, relatively cheaper. A rise in China’s purchasing power means the resource-hungry country could accelerate the development of its infrastructure, spurring greater demand for copper. The price of copper turned once investors realised that China wouldn’t allow the renminbi to appreciate rapidly and after questioning whether a stronger renminbi would even equate to more demand for the metal. Copper prices took a further hit on Wednesday when new home sales in the US plunged a record 32.7% in May. With an excess capacity of homes building up in the US and less building permits being issued, US demand for copper is likely to weaken over the coming months. There is a good chance that China will provide further details of its recent currency move, nevertheless, and this could provide copper with a short-term boost. Anthony Grech, London
Notes: Source: [1] Bloomberg News (23 June 2010) [2] Reuters News (24 June 2010). Chart data sourced from Bloomberg. Bloomberg Median Forecasts are produced by Bloomberg by taking the median level from rates forecast by a number of contributors. These contributors consist of leading banks and security firms.
Analysis
Triangle identified at 09-Jun 12:00 GMT. This pattern is still in the process of forming. Possible bullish price movement towards the resistance 76.51 within the next 4 days.
Supporting Indicators
Upward sloping Moving Average
Resistance Levels
(B)
76.51
Last resistance turning point of Triangle.
(H)
75.35
Last resistance turning point of Channel Down.
Support Levels
(A)
70.46
Last support turning point of Triangle.
(E)
68.13
Last support turning point of Channel Down.
Brent has broken through two resistance levels of a Triangle and a Channel Down on the 4 hour time-frame; however they have not been very convincing breakouts. They are nevertheless providing some confirmation of a gradual upward sloping trend that is developing. Price is currently near the resistance of this new range at (B), which can either be broken or touched before sending the price to support near $72.
Analysis
Triangle has broken through the resistance line at 08-Jun 16:00 GMT. Possible bullish price movement forecast for the next 1 hour towards 73.496966
Supporting Indicators
Upward sloping Moving Average
Resistance Levels
(B)
72.41
Last resistance turning point of Triangle.
Support Levels
(A)
71.32
Last support turning point of Triangle.
(E)
70.46
Last support turning point of Channel Down.
Two recently completed patterns confirm a bullish outlook, although it is currently still very much in a consolidation phase. The one thing that is quite clear at this point is the strong resistance marked by levels (E) and (A) and very clearly identified by the upward sloping blue support line of the Triangle. Resistance at level (B) is holding the price of Brent back, but the pullbacks from that level is getting smaller and smaller, creating a classic Ascending Triangle shape, which could suggest that a bullish breakout to the target level of 73.5 is imminent.
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For example, copper has many industrial uses such as for electroplating and transmission and generation of electricity. It is also used in making various instruments and day to day items such as kitchen pots and electrical wires. The fact that these element is linked to these purposes mean that a sudden surge for industrial and electrical demand in the world market mean that copper prices will soon rise. That is why traders update themselves with the global working trends so as to gain an insight on whether to call or put in the next commodities options trading hour. The same is true with other commodities; traders must know when to expect higher or lower prices to profit from the trade.
To succeed in this kind of options trading vehicle, a trader must have more than common sense. He must be able to study world trends and global demands for certain commodities like natural gas, petroleum, and precious metals. There are many ways in which traders could get information about these. The easiest and fastest perhaps is through internet. Different news agencies could also be reporting about it.
At the end of the day, there is no big discrepancy with the methodology of the commodities trading option. The only thing that makes it different from usual binary options trading is the need for ample research before anyone trades in it.
Gold traded at $1,223.50 per troy ounce on Thursday morning, just $26 dollars off its record high and up nearly 0.90% on the week, after a confluence of negative news from the eurozone and China encouraged investors to diversify into the precious metal. Fitch’s decision to downgrade Spain by one notch to AA+ late Friday and the ECB’s warning about the European banking sector facing up to €195 billion in writedowns by 2011 sparked another wave of risk aversion. This scuppered Wall Street’s brief rally last week and sent investors running back to the safety of gold and US government Treasuries. Political instability in Japan, growing geopolitical tensions on the Korean peninsula and certain Middle Eastern countries as well as data showing a bigger-than-expected slowdown in Chinese manufacturing activity in May also supported gold. Unsurprisingly, physical demand for the precious metal has remained robust in this risk-averse environment, with holdings in New York’s SPDR Gold Trust, the world’s biggest exchange-traded fund backed by bullion, rising to a record 1,268.23 metric tons on Tuesday. On the supply side, meanwhile, a report released from the Chamber of Mines of South Africa earlier this week revealed that gold production in the country declined 12.4% in the first quarter from a year earlier and dropped 15% from the fourth quarter. South Africa is the fourth biggest producer of gold behind China, Australia and the United States. It stands to reason that the price of gold may also be supported by a potential imbalance between supply and demand. Anthony Grech, London
High Grade Copper’s intraday trend continues to push lower thanks to global equities weakness. Demand for copper, as is the case for most commodities, increases with the perception of a healthy economy and expected growth. The current downtrend in Copper reflects the continued pessimism seen on the Dow Jones and other averages worldwide, such as the Australia 200 and the FTSE 100.
The downtrend on the 30-minute chart appears to be slowing in the very near-term, but the trend on this time frame is still quite bearish. The length of this pattern, at just 32 candles, is short, which keeps the Initial Trend reading low (only two bars) and helps confirm near-term consolidation within the Falling Wedge. While continuation lower through support at 296.7 (S) and the exhaustion off resistance at 300.5 (R) would trigger a short-sell entry (with expectation of prices moving lower), don’t rule out a short-term reversal. As the pattern is short, a pierce higher through 300.5 (R) could trigger a trend reversal buy, with follow-through likely to reach resistance at the prior highs near 306.
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Gold traded at $1,212 per troy ounce on Thursday morning, representing a 3.9% increase from Friday’s low of $1166.3, when violent stock market swings encouraged traders to take profits in gold to cover margin calls in other assets. The precious metal, often considered a currency of last resort, rose to a one-week high on Wednesday afternoon, after the embattled euro slid on the back of Italy’s decision to approve a budget reduction plan and a bigger-than-expected drop in German consumer confidence. There are fears that the Italian government’s plan could slow domestic growth and add to the euro region’s woes and, as a result, investors have increased their exposure to gold in order to hedge themselves against the depreciating euro. The nationalisation of Spain’s CajaSur savings banks and escalating tensions between North and South Korea, have also contributed to gold’s rebound this week. From a fundamental perspective, gold seems to be supported by physical buying from Exchange Traded Funds as well. Holdings of the world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, rose 30.4 tons on Wednesday to a record 1,267.3 tons, the biggest one-day inflow since 12 February 2009. Meanwhile, a report from the World Gold Council (WGC) forecast ‘strong’ growth in gold demand this year thanks to an increase in investment demand and jewellery usage. According to the WGC, restocking at Western manufacturers and a strong economic expansion in China will help global gold consumption increase. The WGC also said demand for gold from India is set to grow rapidly as well, since the nation is becoming more affluent and more accustomed to gold’s high price. ‘There has been a recovery despite higher prices’ said Eily Ong, an investment research manager at the WGC. ‘The economic crisis in Europe isn’t going to be resolved in the next month or two. Investors have now strongly moved into gold as somewhere safe to store their money.’ [1] Anthony Grech, London
Gold traded at $1,212 per troy ounce on Thursday morning, representing a 3.9% increase from Friday’s low of $1166.3, when violent stock market swings encouraged traders to take profits in gold to cover margin calls in other assets. The precious metal, often considered a currency of last resort, rose to a one-week high on Wednesday afternoon, after the embattled euro slid on the back of Italy’s decision to approve a budget reduction plan and a bigger-than-expected drop in German consumer confidence. There are fears that the Italian government’s plan could slow domestic growth and add to the euro region’s woes and, as a result, investors have increased their exposure to gold in order to hedge themselves against the depreciating euro. The nationalisation of Spain’s CajaSur savings banks and escalating tensions between North and South Korea, have also contributed to gold’s rebound this week. From a fundamental perspective, gold seems to be supported by physical buying from Exchange Traded Funds as well. Holdings of the world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, rose 30.4 tons on Wednesday to a record 1,267.3 tons, the biggest one-day inflow since 12 February 2009. Meanwhile, a report from the World Gold Council (WGC) forecast ‘strong’ growth in gold demand this year thanks to an increase in investment demand and jewellery usage. According to the WGC, restocking at Western manufacturers and a strong economic expansion in China will help global gold consumption increase. The WGC also said demand for gold from India is set to grow rapidly as well, since the nation is becoming more affluent and more accustomed to gold’s high price. ‘There has been a recovery despite higher prices’ said Eily Ong, an investment research manager at the WGC. ‘The economic crisis in Europe isn’t going to be resolved in the next month or two. Investors have now strongly moved into gold as somewhere safe to store their money.’ [1]
