With the dollar holding steady the precious metals begin to look pricey. The cost of holding long positions begins to present a problem and with no currency appreciation to help out we may see a second leg to the recent sell off. That said Financial Spreads clients continue to buy into any weakness so there is still strong confidence in the $1,000+ mark.
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Commodities Spread Betting, 27 Mar 08
Gold added to Tuesdays move with another $15 gain yesterday up to the symbolic $950 level where we open this morning. If the dollar strength is confirmed we may see a little profit taking in the yellow metal but as with the indices our clients continue to be buyers on any weakness.
Painful as the gold fall was for many traders, the fallout in the Silver spread betting market was even more dramatic. The price dropped from a high of $21.40 to a low (just before Easter) of $16.70 a move of over 20%. In gold terms this would have meant a fall to close to $800.
Commodities Spread Betting, 26 Mar 08
The commodities markets were a bit brighter yesterday and Gold managed a $25 rally as buyers came in expecting a continuation of the rally after the recent sell off. Weakness in the dollar also helped slightly but volumes were light. The gold spread is opening at $937.8 - $398.3 unchanged overnight. The support at around $905 (where there was quite a battle a month or so ago) held well over the last few sessions and the bounce will have taken out quite a few weak shorts. We are now back at the levels that were quite a resistance to going higher in January so a close above $940 would be welcomed by the bulls as possible evidence of a rejection of the recent falls.
Commodities Spread Betting, 25 Mar 08
Commodities also had an exciting time of it yesterday with Gold trading the $912 to $925 range several times and this morning jumping $12 from the aforementioned low of $912 where we closed last night. This morning we’re opening the gold spread at $924.5 - $925.0. The pull back from the highs of $1030 has been quite spectacular but recent retreats (over the last two/three years) have generally been worse than this so ‘new’ bulls should be wary of getting too excited by the chance of ‘getting in’ at a cheaper level.
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Commodities Spread Betting, 20 Mar 08
On the commodities front it was nice to see after all the press comment on Tuesday about how everyone should be buying Gold that the yellow metal has (in just three trading sessions) dropped almost $100. As mentioned in yesterdays comment our biggest and longest term Gold longs all sold out on Monday, well above the $1,000 mark. Readers who followed their lead will be sitting on nice little profits now. With the gold spread betting market at $936.0 - $936.5 we are still very much in a bullish momentum move. However, as with all big trends there will always be major corrections to shake out the unwary or the overly aggressive (otherwise we would all be millionaires!).
The Daily Comment will continue after the Easter Break.
Commodities Spread Betting, 19 Mar 08
The dollar which had managed a bit of a rally yesterday on the Fed announcement is giving it all back again this morning. This is causing a bit of a move higher again in Gold as the yellow metal strives to recover from the vicious sell off over the past two days. Highs to lows in Gold from Monday morning to yesterday evening were some $60 and we can anticipate that there were some nasty hangovers from weak buyers who were coming in late to the commodities party. Two of our biggest Gold bulls actually sold out of their very long term positions on Monday morning (wish I had followed them!) realising massive profits. No doubt they will be back in at some point but even the drop to $975 last night did not tempt them.
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Commodities Spread Betting, 18 Mar 08
Commodity markets had a pretty solid reversal yesterday after the huge early move in Gold was completely turned over by the close.
Brent Crude Oil fell $4 yesterday to 'just' $102.00.
Platinum fell 5% meaning that it has now given up almost half of the recent Jan/Feb rally.
In the softs markets there were almost universal falls as longs were squeezed all day. There has been a huge allocation of speculative funds to the various commodity markets and volumes are many times the norm. If Margin calls are increased here as well we might actually see quite a nasty little bear move in the seemingly all powerful commodity sector.
Commodities Spread Betting, 17 Mar 08
As the fear over asset values continues to sweep across continents, Gold powers on unabated. It is trading $27 dollars higher than Friday’s close an impressive move in anyone’s language. As the dollar has fallen some 2% versus the Yen the rally is not so impressive in far Eastern terms but still marks new all time highs. And, as I have commented many times before, it is a brave man who fights against the tide. Although I must also add that I personally believe that Gold, in the long run, is a very poor investment tool.
Momentum in commodities is likely to accelerate again today on initial opens and if the US allows the deterioration in the dollar to continue unabated we will see continued inflationary price pressure. From the viewpoint of China, Japan, Russia etc all those dollar holdings (trillions of them) picked up over the past decade or so are now worth some 25% to 30% less than last summer. These are real losses and the bond holders concerned will not be happy with the benign neglect of the Fed. Italy (with a stable and appreciating currency backing up its bonds) failed to get its government bond auction away last week. What hope for the next US Treasury issue? The US depends upon the influx of foreign buyers to sop up all the issuance. If this disappears who will pick up the slack? Probably not the investment banks you can be sure of that!
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Commodities March Spread Trading' by DB, updated 28-Mar-08
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