Commodities are trading on a weaker note Friday, with all eyes turning to the US non-farm payroll which showed a better than expected 151,000 addition to jobs in the month. That said, this does come as some consolidation following yesterday’s strong rally, which saw WTI Nymex crude hit a 2-year high at $87.20/bbl, spot gold hit yet another all-time high at $1,394/oz, and spot silver a 30-year high at $26.65/oz.
The Fed’s $600 billion Treasury purchase and the weakness in the dollar it is bringing, has been the main driver behinds the commodity rally yesterday, although today’s session sees the greenback bouncing back a little, and with it, benchmark commodity prices easing off. Crude oil is only marginally lower in today’s session, with the commodity boosted further after OPEC Secretary general el-Badri mirrored comments from the Saudi Oil Minister, suggesting an oil price of $90/bbl will not be obtrusive to economic growth.
The Fed quantitative easing move and the subsequent concerns surrounding the dollar, have boosted the precious metals complex particularly following the announcement, and as previously highlighted, pushed spot gold and silver to a record and 30-year high respectively. In addition platinum made a 2-year high of $1,780/oz and palladium jumped to its highest level in around 9 years at $690/oz.
The complex is once again consolidating again today following yesterday’s sharp gains, although gold has seen a mild boost after news Turkey, one of the worlds biggest gold processors, imported 9.1 tonnes of the yellow metal in October, up from the previous month’s figure of 2.5 tonnes; a sign perhaps that despite record highs, the world’s consumers are maintaining their appetite for the precious metal.
From a technical perspective, although yesterday’s rally did break through overhead resistance from the previous record high at $1,387, today’s pull back sees the rate once again hovering just below this level, and a clean break and close above would be need to suggest further gains will be made. Yesterday’s move did trigger a buy signal in the daily stochastics, although at the same time the peak came as a bearish divergence showing some near-term weakness may be on the cards.
Base metals have been following the precious complex following the Fed announcement; rallying yesterday and consolidating positions somewhat today.
Copper is trading near a 28-month high on the London Metal Exchange at $8,800/tn, only a marginal distance from its all-time high, which could easily be topped again given the tight fundamental supply situation underpinning the copper market.
The Fed move also particularly brought about strong buying in the more industrious metals in Asia overnight, with the Steel Index (62 percent iron ore benchmark) jumping to $153.20/tn, while Indian iron ore was seen topping $165/tn Friday.
As with other commodities, agriculturals have been no different in rallying to the Fed announcement, with corn and soybeans rising to 2-year highs, coffee Arabica hitting a 13-year high, sugar a 30-year high and cotton at an all-time high.
The move had such a broad impact on the agriculturals due to the large position the US holds in almost all these markets. In addition, expectations are beginning to rise that the US Department of Agriculture (USDA) will be announcing yet another downward revision to the SU corn crop next week.
Disclosure: no position