[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.

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Commodity markets retreat on swine flu fears

Commodity prices retreated around the globe as fears grew about the highly contagious swine flue .

Crude oil prices fell. ICE June Brent was down $1.15 to $49.17 a barrel while Nymex June West Texas Intermediate dropped $1.30 to $48.84 a barrel.


“There is a risk that the flu scare will hit international aviation travel, which would have a negative impact on demand for jet fuel,” said Eugen Weinberg at Commerzbank.

He added: “Current low oil prices will cause Opec to maintain current production constraints or take steps to cut back output even further, which supports our view that crude oil will trade at US$70 a barrel by the end of the year."

Soy rose $.03 cents to $10.07 a bushel, steadying only after dropped $.35 cents in yesterdays session.

Copper fell 2.4% to $4,205.50 despite a fall in 5,000 tonnes of stockpiles according to the London Metal Exchange (LME).

Tin lost 3.6%, falling to $11,860 a tonne.

Nickel fell 2.6% to $10,860 a tonne.

Gold dropped below its 900 level to a spot price of $898 a troy ounce.

James Steel of HSBC said the gold market had failed to react positively to news of the swine flu outbreak for two important reasons.

“First, investors flocked mainly into the dollar and other safe haven currencies, rather than into gold. The subsequent rally in the dollar weighed on gold prices.