Yellow and Black Gold are starting off on the weak side in early action as prices retreat from the big moves to the upside of yesterday (gold) and Wednesday (oil). Gold peaked at $925.5 just before the US open yesterday and then drifted for the rest of the session all the way back down and we are now calling the Gold Spread at $910.3 - $910.8. Dealers are trying to fathom which of the two spike moves (the one lower on Wednesday or higher yesterday) will prove to be the forecast indication to watch.
Commodities Spread Betting, 31 Jul 08
Gold has had one of its more exciting 24hrs dropping straight through the support levels mentioned in yesterdays comment between $912 - $914 and dropping $20 in the next few hours down to $892 before turning straight back round again such that we open this morning back above that very same $914 level. Capital Spreads Clients spent most of the day underwater continually buying on any falls but have now been rewarded for their perseverance. The problem is that the support is still there to be attacked and a second break might not be helped in quite such a robust fashion.
Crude Oil also reversed its previous falls and the $121 level identified many weeks ago as the short term target for any reversal has now proved to be good enough support for the time being. The US inventories reversed last weeks numbers and the weaker than expected number helped Brent to bounce $6 from the lows. We are now at $127 and looking reasonably comfortable.
Much as I like people trading as much as possible (that is where we make our money from after all) the current levels in Commodities do not suggest opportunities in either direction and unless supports or resistances are breached it is probably better to sit on our hands and wait for a signal.
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Commodities Spread Betting, 30 Jul 08
The drop down to the current Euro / Dollar spread of $1.5577 - $1.5579 came as a welcome piece of good news to clients as the longs in Oil were well and truly hammered by the midmorning and early afternoon dramatic falls. Punters attempted to catch the falling knife all the way down and only a few were able to profitably take advantage of the small bounce just before the close. My medium term target of $121 has now been reached (with a low of $120.92 yesterday) and dealers will now be trying to asses whether the longer term direction is down or if there is a chance of a bounce from here.
This afternoon will bring the Oil inventories number from the States and clients are likely to sit on their hands until then.
Gold has also come in for a bit of a battering in recent days and with the bounce in equities (once again) and the small strength in the dollar the bears have been able to force the pace. If the perception over the long term return for the yellow metal begins to change then the price could fall a very long way indeed. We need uncertainty to drive investors into buying but at the moment the price is proving a little high to tempt further position building.
The main fact is that even the truly horrendous stories out of the Financial sector over the past few months (at one point even Fannie Mae and Freddie Macs existence was being called into question) failed to create a new high. At the current price of $916 we are still seeing strong buying from clients looking for a bounce after the recent drops. Support is just below here between $912 and $914 so there is a possibility of some strength but if we fall under the $912 mark then bears will be targeting the $875 region.
Commodities Spread Betting, 29 Jul 08
With the renewed weakness commodities seem to be having a bit of a renaissance as the knee jerk “sell equities/buy commodities” or vice versa does its dance once again.
The Crude Oil spread is up at $126.40-45 for September Brent well off yesterday’s low of around $124. Capital Spreads Clients continue to buy into any weakness so the bounce will come as a bit of a relief after the weakness over the last two weeks. The fall in the dollar in late action yesterday will have helped the Commodity bulls but this now seems to have run its course so a new impetus will have to come from elsewhere. Tomorrows’ oil inventories could be the trigger for another dramatic shift but it would be foolish to try to guess which way.
Commodities Spread Betting, 28 Jul 08
Gold closed last week down -$35.55 at $921.65 (down -3.71%)
Brent Crude Oil (September) closed last week down -$5.67 at $124.52 (down -4.36%)
WTI / US Oil (September) closed last week down -$5.62 at $123.26 (down -4.36%)
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Commodities Spread Betting, 25 Jul 08
The resurgence of the bears has given Gold its chance to recover some of the losses of earlier in the week but the move appears to be more of a knee jerk “the markets are falling so buy precious metals” rather than anything else.
Elsewhere crude oil has recovered a couple of bucks on renewed fears over Nigerian and Iranian supply but the rally is not as strong as this type of rumour would have achieved just a week or so ago. September Brent is opening at just under $127 still $20 off the highs of just last week. Buyers are coming back into the market on hopes of something of a rebound but they are keeping their stops very close just in case of a return to the weakness of Monday to Wednesday. Russian production remains weak but the problems over TNK-BP do not seem to have ever threatened supply further. The tacit Russian State approval and aid of just four super rich individuals over the entire world wide share holders in BP is another chilling indication of the problems involved in being ‘over there’. It seems to match the sort of problems that foreign financial institutions have historically experienced in doing business in the States.
Commodities Spread Betting, 24 Jul 08
Yesterday’s activity was heavily dollar focused with the rally in the Greenback causing further decays in dollar priced commodities. As mentioned yesterday Gold was looking a tad weak and the price action throughout the session bore this out with a $30 fall to $918 by the close. This morning there has been a bit of buying from the Far East and we are back up at $925 which will be something of a relief for our Capital Spreads Account holders who have been resolute buyers throughout the recent drop. In the longer run Gold looks over valued at current levels IF you believe that the current financial woes might be playing themselves out. The problem is that it is unlikely to be that easy for the world economy and there is a strong likelihood of several buried bodies being found before the lid can be closed on this episode.
Crude Oil also joined in the rout with another $4.50 drop and Financial Spreads are now sitting uneasily at $125 bucks for September Brent. It is very difficult to call either way at this point as absolute value (probably between $60 and $80 dollars) is at the mercy of so many outside influences.
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Commodities Spread Betting, 23 Jul 08
Crude Oil is suddenly in the scenario of being ‘Billy No Mates’ in the kitchen at parties. It has now retraced $20 from the highs of last week and punters are getting a little burnt in the fall out. Stories of $150 and $200 bucks a barrel (whilst possibly true in the medium term) have tempted buyers out of the woodwork just as the price has dumped lower. September Brent is now down at support at $127.75 and buyers will be hoping that the level will hold. The momentum appears (for the time being) to be in the sellers favour and if this level is broken on a close the next target will be down to $121.
Gold has also had something of a brick wall moment having flirted with the $1000 level early last week when hitting a high of $989. The Gold spread betting market is now down at $939.4-939.9 and longs will be hoping that this is just a pull back scenario in the current bull move. We moved higher so quickly that there is not much recent volume levels to pinpoint but well below here at $929 would seem to be crucial to maintaining a move higher. If the banking sector is in the process of crawling out of the wreckage then the argument for gold begins to look very weak indeed. In the end Gold is just a pretty, useless, yellow lump of metal. Too valuable to actually use for anything and costly to own. In times of trouble it has safe haven value but in good (or even just slightly bad) times of little worth as a long term investment.
The recent weakness in Commodities has been dollar related to some extent as the greenback has had something of a bounce in the last few days but the problem for commodities is that they are in high territory for two reasons (weak dollar and supply). If either of these reverses then the fall out could be spectacular.
Commodities Spread Betting, 22 Jul 08
The continued winner remains Gold as punters begin to run for cover once more. A surge in Gold might give rise to fears that the same cycle that occurred late last year and in Q1 08 might repeat itself with investor piling out of assets into precious metals and cash. With the dollar continuing to pressure its lows the fear of another lurch to the downside for the greenback is on the minds of many players. The huge Treasury issuance programme continues unabated and if the buyers from Russia, China and the Middle East start to rein in their purchases the dollar might well have a trying time of it. On the other hand the buyers are in a cleft stick themselves in that if they overtly abandon the Treasury Auctions their own holdings would reduce in value quite significantly. When these holdings are in the Trillions it does not take much to wonder whether the dog is wagging the tail or the tail the dog.
Longs in Crude Oil breathed a little easier as storm worries forced the market higher yesterday but the problem with this type of surge is that during the aftermath (if no structural damage occurs) the reaction can be more violent than the original move. Brent is due to come in at $132.20 - $132.25 down about 40¢ from the $2 move higher yesterday.
Commodities Spread Betting, 21 Jul 08
Gold closed last week down -$6.60 at $957.20 (down -0.68%)
Brent Crude Oil (August) closed last week down -$14.30 at $130.19 (down -9.9%)
WTI / US Oil (August) closed last week down -$16.20 at $128.88 (down -11.17%)
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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 Spread Trading July 2008' by DB, updated 01-Aug-08
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