Saxo Bank (Saxo Bank)
Commodities  |  March 04, 2013 13:11:56

Commodities ruthless hit hard in February


Unlike the strong January February brought key commodities usually lost. This was due to both individual events across sectors and some bad news from the macro data. A role also played political games. By contrast forms returned dollar and ended two months-long decline. During February added more than three percent against a basket of major currencies, which are then reflected in the poor performance of commodities.The growth was driven largely by purchases of dollar against the Japanese yen, as well as depreciation of the euro due to the result of the Italian elections. The local pat had resulted in higher cost of lending less core eurozone countries like Spain or maybe Italy. And last but not least, it appeared fears of a return to the debt crisis.

And at the other end of the world then we see how China has ceased to usurp liquidity in order to ease rising prices rocketing real estate. This can ultimately lead to higher inflation and consequently in lower activity industry than originally expected.The new Chinese government will have at the end of the month only limited room to maneuver. In contrast, the U.S. economy strengthens decently. But when the fluctuations caused by increasing taxes at the beginning of the year, high gas prices caused by seasonal effects and the automatic cuts, which took effect from 1 March.

The price of soft commodities such as sugar, coffee, or Arabica coffee beans, signed with better conditions for growing and also higher offer. Weaker results are then moved to the main crops, namely maize and wheat. Subsequently worse performance and sales by investors hit and precious metals.While those with bad fighting for several months. Anyone as no surprise that the gold stuck worst series of monthly losses since 1997th A correction also affected commodity-dependent on economic growth, ie. as industrial metals and energy. Expectations of future growth and demand is diametrically opposed to the current fundamentals and reality.

During February saw two major commodity indices similar losses. And despite the fact that they cover different range of commodities. The losses affected all sectors, including agricultural. The greatest wounds suffered while precious and industrial metals.

The black numbers during February managed to get only three commodities. Best-led natural gas, which helped cool U.S. winter and generally stronger demand. This helped to reduce surplus stocks before a new mining season, which starts in a few weeks. And even managed to cotton, which has risen due to higher demand for U.S. supplies. Is expected that local farmers will soon shift towards more profitable crops, and its offer to drop.

In the worst results reported by silver, which has lost more than 10 percent. Pulled him down general weakness of precious and industrial metals. Its price as compared to gold fell to its lowest level since last December. Yet it is interesting that silver, unlike gold did not experience any loss of position on the part of the Exchange traded products (ETPs). Rather the opposite - in the past four months, the position into negative waters never got. The expected recovery of world growth is silver helped because investors chose it for the longer term horizon.

Gold is facing a stampede of investors

February was also another test for gold because its price had fallen for the fifth month in a row. Similarly, negative developments, this metal can remember since 1997. Cash fund managers for months pulling its net long positions and recently this trend even got to the maximum since 1999. Thus, the time when the European Central Bank nimbly got rid of their gold reserves. Gold, despite reassuring statements by Fed Chairman Ben Bernanke, who advocated the continuation of quantitative easing, could not get beyond the resistance. It is now worth $ 1,620 per ounce. It is for that particular ETP investors who withdraw their gold at a net long position. These investors were yet, until recently, very tough and buying gold despite its lack of performance.But it is during the second half of February and turned the overall decline was nearly 110 tons. According to Bloomberg, this was the largest monthly drop in the relatively short history of ETP products.

Gold has been on a combination of the strengthening dollar and strong data from the U.S. economy, able to respond. Key support for the border 1555 and 1525 dollars per ounce would again could espouse. As I mentioned, the U.S. economy is growing steadily, but a few factors, such as higher taxes from the beginning of the year, the period of record prices for gasoline and other cuts from 1March, its growth could slow down. And it might have to repay part of the gold. Higher political risk and concerns about the European debt crisis posed and Italian elections, so the question is how to take action in this case the European Central Bank (ECB). Gold and silver could help up also increases speculative short positions.

Crude oil fell after expectations of future growth leveled with current fundamentals

Both types of oil continued to return to their values ??in January. WTI Crude oil fell while the lowest level since the beginning of this year because of its production and reserves in the United States began to rise. For Brent, he began to reassess price development, so that the expected growth of the economy compared to the current fundamentals. According to recent reports grew as the Chinese purchasing managers index PMI at a slower pace than expected. In the next few days will be interesting to watch the 12th National People's Congress, Beijing is because on the one hand trying to fight rising inflation, while also trying to stimulate the production and consumption of households. And just because China has a year in total world demand a large share, any change in vision can have a huge impact on the fundamentals and price.

For Sale oil was to some extent driven by investors who needed to get rid of their speculative net long positions. They even at one stage reached values ??of 2011 and 2012, which had already proved to be unsustainable. Brent eventually moved back to přívětivějšího range, which could be helpful to find support at 109 dollars per barrel, a 200denním moving average. Boundary resistance then leads to 112.50 dollars per barrel.


Ole Hansen, commodity strategist at Saxo Bank

 

 

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