It's been a rough stretch for commodities which have taken a hit due to the ongoing political and economic trends unfolding in the Eurozone. The basic speculative logic assumes that Europe will enter a period of recession and demand for crude oil will be reduced. As a result, investors will most likely predict that the downward trend in commodities such as Nymex Wit Crude, Ice Wti Crude, Ice Brent Crude, Nymx Natural and Nymex Gasoline will continue. Gold and Silver have just made gains again with Comex Gold and Silver Spot leading the way with an impressive rise of 3.90, true to the time this writer checked Bloomberg Commodities stats and figures.
So here's my financial analysis of the commodities. The three major geo-political events influencing the commodities exchange rates are as follows:
Firstly, the Greek government's inability to form a national unity government, as well as negative public sentiment towards austerity measures have created a negative effect and caused a Euro devaluation. At the same time the Greenback has shown resilience despite the troubling unemployment report submitted to the Obama administration. Furthermore, the Greek sovereign national debt has grown to catastrophic proportions and so far no government is willing to provide assistance in the form of loan guarantees.
Secondly, the Spanish recession is partly caused by a surge in the unemployment rate which currently stands at a catastrophic 24.1% and does not seem to be improving. But the primary reason for Spain's financial woes is the property bubble. In this case there was a surge in housing construction which exceeded local demand. To be more specific, the Spanish economy did not generate enough wealth for middle income families in order to purchase houses. This means that there are large areas in Spain, like Catalonia, which have housing projects that have been cut off in the middle due to inability to sell properties.
Spanish construction companies needed to resize or declare bankruptcy in some cases, and this spiraled into a national recession due to the fact that the housing industry indirectly contributes to secondary economic spheres such as the lumber industry, the concrete industry, other subcontractors and so on.
To exacerbate the already tense situation, Spanish energy Giant Respol (REPYY.PK) suffered a massive blow as Argentina decided to nationalize YPF, which is South America's biggest oil company. Respol, a major shareholder, has filed a grievance and the Argentinean Ambassador in Madrid has been summoned to provide "clarifications."
Finally, France-Germany relations have recently created a negative backlash due to the conflicting policies of the newly elected Hollande. Coming from a strong social background Hollande does not support austerity measures in France as had not been the case with his predecessor Sarkozy.
Surprisingly during times of unrest the market has usually resorted to speculating on commodities such as oil, but this has not been the case. In my humble view this will change very quickly because oil is one of the only commodities investors have traditionally flocked to during time of unrest. Also, from a purely mathematical view, this natural resource is dwindling while the human race is not only growing but is also living longer and still needs to commute.
For those of us who trade binary options that put button can be very tricky; I would hold on to my oil stock. The market is bound to change in the favor of the black gold just like it's done before, so let's chat in about 6 months from now.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.