Posted on 06/15/2009 6:19:38 PM PDT by FromLori
Commodities staged a broad retreat on Monday, with oil dipping below $70 a barrel, as a stronger dollar and cautious comments from Chinese premier Wen Jiabao over the durability of his country’s economic recovery weighed on prices.
Mr Wen’s suggestion that the drop off in foreign demand for Chinese goods could hamper the country’s economic growth knocked the faith of investors convinced that a sharp upturn in Chinese demand would reinvigorate the commodities markets.
EDITOR’S CHOICE Aluminium defies laws of supply and demand - Jun-15
Video: Javier Blas on the doubling of the oil price - Jun-12
Lex: Oil price rally - Jun-11
Price of crude ‘right’ in $60-$90 range - Jun-10
IEA’s upward revision feeds the bulls, but doubts on full recovery remain - Jun-11
Senate backs tighter curbs on tobacco - Jun-11
The large gains across the raw materials spectrum last week also prompted analysts to question whether the rally had been overbought and a correction was due, with others simply taking profits after a large rise.
“We retain our view for a strong correction in the price of oil from current levels,” said Harry Tchilinguirian of BNP Paribas.
“On the fundamental side, a high-level demand cover by inventories in OECD countries, Opec slippage in compliance with stated targets reductions in supply and still weak economic activity combine to put downward pressure on the oil price.”
Oil wandered below $70 a barrel, having hit an eight-month high last week of $73.23 a barrel, in part due to a stronger dollar.
Nymex July West Texas Intermediate fell $1.42 to settle at $70.62 a barrel after dipping below $70 in trading. ICE July Brent shed $1.48 to close at $69.44.
Analysts at Commerzbank have questioned the idea that gains for oil had been driven by speculative investment strategies by hedge funds and other non-commercial market participants.
“While commodity funds have seen increasing inflows lately and non-commercials’ net longs at the Nymex increased massively, current data do not yet indicate great excesses.”
Base metals similarly fell back from their highs of last week. Copper lost 4.1 per cent to $5,010 per tonne, aluminium shed 1.8 per cent to $1,610 per tonne, while zinc dropped 6.1 per cent to $1,570 per tonne.
Robin Bhar, a senior metals analyst at Calyon Crédit Agricole, put himself forward as a rare bull on aluminium, which has risen in spite of record supplies sitting in London Metal Exchange warehouses.
“Restocking will boost demand in just the same way that destocking exacerbated the demand fall last year and in the early months of 2009,” he said.
“This is one reason to explain the recent increase in aluminium prices. Many are expecting a V-shaped recovery in demand as heavy destocking is replaced by restocking. We could therefore be at the beginning of a classic restocking bounce, as the inventory cycle turns.”
Gold also suffered, falling 1 per cent to $928.70 per troy ounce. Commerzbank Dresdner Kleinwort analysts advised investors to adopt a cautious approach to the gold market.
“First, regardless of the market reaction, the medium-term risk of a strong inflation has abated,” they said. “Second, jewellery demand remains very weak ... In our view, gold will continue to be impacted by the US dollar.”
Agricultural commodities were also lower, with CBOT July wheat trading down 11½ cents to $5.73¼ a bushel, and CBOT corn for July shedding 17¾ cents to $407½ a bushel.
Time to sell the gold.
Ping.
Patience. A longer view is prudent.
I agree and am taking the long view. Last july Gold broke a 9 year trendline. At about the same time the dollar broke a 4 year down trendline and began trending up. Sell.
My own view is that precious metals are a disaster hedge, not an investment in the usual sense of the word.
I hold silver, gold is out of my reach. But I do not plan on turning it for a profit in dollars. I have it stashed away strictly for economic and/or natural disasters where paper currency could have no practical value.
I would be satisfied if the silver I hold never was needed, that it should gather dust. But, I do not believe that will be the case.
That makes good sense. I was mainly referring to those would be speculators.
I think we're headed for a 'W' shaped recession.
Yes. I suspect that serious speculators go in and out of dollars and metals as often as changing clothes. No one with any sense would buy dollars with the plan of holding them for a long haul.
There is simply nothing (even potentially) on the horizon that will provide long term strength to the dollar.
“Backed By The Full Faith And Credit Of The United States Government” /sarc
I respectfully disagree. See post 94 on this thread:
http://www.freerepublic.com/focus/f-news/2271548/posts?q=1&;page=51
Yes, I feel the same way. I’m hoping that the “recovery” is sufficient for me to further prepare for the real crunch that will follow. Right now I am just treading water, trying not to eat my savings.
ECB Warning On Banks Rattles Global Markets
The European Central Bank has given its starkest warning to date on growing strains in the eurozone credit markets.
By Ambrose Evans-Pritchard
Published: 9:11PM BST 15 Jun 2009
It said it is expecting fresh bank writedowns to hit $283bn (£173bn) by the end of next year. "Policy-makers and market participants will have to be especially alert in the period ahead. The credit cycle has not yet reached a trough," said the ECB's Financial Stability Report.
The deterioration in the macro-financial environment has continued to test the shock-absorption capacity of the euro-area financial system. Prospects for a significant turnaround in the short term are not promising," it said.
[snip]
I knew it! The Fed has yanked liquidity to tank the market and scare people back into treasuries (just like last September).
Now I can’t prove it, but I feel it.
You're right, no one can predict what's going to happen and I'm certainly no exception; I admit I could be totally wrong. Having said that here's what I've got:
1. Record high gold prices at a double top with the 9 year trendline broken last july.... a technical sell signal. http://www.the-privateer.com/chart/gold-pf.html
2. This july breakout coincides with a falling eurusd and a rising usdcad.
3. Record high unemployment (28 year high). Unemployment as you know, runs the inverse to inflation, so record high unemployment (probably still rising) means record low inflation.
3. Larry Summers and his gold selling. The "leases" that the fedgov are selling sound suspiciously akin to the "borrowing of stocks" in order to short-sell.
4. Common sense: look around you. Do you see prices of anything rising? The only thing I see that's going to go up in the near term is taxes, and that's very deflationary.
5. Huge reduction in the money supply. Yes the fed just printed up 1 trillion, but the banks and the credit card companies just reduced by 2 trillion. Leaving a net reduction in the money supply of at least 1 trillion. Look for inflation when "Stated income" loans return.
94 posted on Sunday, June 14, 2009 7:40:52 PM by JPJones
Things are not looking good FT also had a few articles about this...
Eurozone banks face $283bn writedowns
ECB says risks to sector intensifying
Greek banks start to feel the heatSpanish realism supplants ‘green shoots’Lex European banksECB says job saving schemes delay recoveryWolfgang Münchau Optimism is not enough
FromMARKETS10:18pm
Yikes!
Thanks for posting. What do you think of my observations? I seem to be bucking the hyperinflation hysteria....
Fears For Financial System Cut Risk Appetite
By Dave Shellock
Published: June 15 2009
Risk appetite suffered a sharp deterioration on Monday as fresh uncertainty about the global economy and the financial system prompted investors to shift away from equities, commodities and emerging market assets into the perceived safety of government bonds and the dollar.
“Risky assets continue to look top heavy as concerns about stretched valuations, especially for commodities, trigger bouts of profit-taking,” said Valentin Marinov at Commerzbank.
The mood in the markets was undermined by cautious comments on the economic outlook from the head of the International Monetary Fund and a warning from the European Central Bank about further writedowns for the region’s lenders.
[snip]]
Reasonable. You and Freeper Southack are on the same 'wave-length.'
http://online.wsj.com/article/SB124510634159916649.html
Securities Revamp Has Its Doubters on Street
Has me for a doubter too.
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