Monday, June 29, 2009

[Commodities] -- Is the rally over?

Commodity Rally May Falter on Supply, Speculators

June 29 (Bloomberg) -- Commodities, heading for the first quarterly advance in a year, may struggle to repeat their gains in the next three months as supply expands and speculators sell.

Nickel may average 29 percent less in the third quarter than now, crude oil 16 percent, copper 14 percent and gasoline 10 percent, analyst estimates compiled by Bloomberg show. Hedge funds and speculators cut their bets on higher prices by 23 percent in the two weeks ended June 23, the first back-to-back drop since March, based on an index using U.S. Commodity Futures Trading Commission data. The World Bank said June 22 the global recession will be deeper than it expected three months ago.

“Commodities have gotten a little ahead of themselves,” said Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. “As long as there’s uncertainty about growth, that’s going to be headwind commodities won’t be able to overcome.”

Commodities rose 14 percent this quarter, led by nickel, oil and sugar, after three consecutive declines, according to the Reuters/Jefferies CRB Index of 19 raw materials. This year’s 57 percent advance in oil costs, combined with widening budget deficits, may cause another global slump, said Nouriel Roubini, the New York University economics professor who predicted the financial crisis.

Click here to access the full article from Bloomberg



Gold IRA said...

In last three month have increased price of crude oil and decreased in copper and nickel which is not good sign for global economic but increasing price in oil might be help to recover global economics.
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Bennett A. Reiss said...

My friend who specializes in the Mid-East feels the same way, but he did back in November as well when he kept on going on and on and on about how there is no way Saudi Arabia will let oil move up even if demand returns because it is their own interest to see the west recover. We'll have to wait and see. All the speculation doesn't help either.

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Equity market falls on the back of profit taking and doubts that the recent rally is not based on solid foundations sent many traders and investors back into the US Dollar resulting in gold trading posting a dramatic reversal of fortunes ending
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Bennett A. Reiss said...

Thanks. As for updates on this particular piece I will do what I can to write a story on commodities in the coming week. This particular post was a common example of one way I attempt to just get news bits out to my readers of articles I am reading myself on a daily basis. Thanks all.

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