Industrial Metals Drop on Weakening in China's Housing Market

Precious Metals Prolong Their Decline

Gold continued its downfall, the yellow metal fell 1.21% extending its losses to three straight weeks. On Wednesday it touched the lowest level in eight months after the Federal Reserve increased its estimate for the target rate on overnight loans between banks on signs that the U.S. economic recovery is gaining pace. In the later part of the week the bullion dropped even lower. On Friday gold futures slipped further as equities advanced to a record, crimping demand for the metal as an alternative asset. According to Midas Funds, many investors do not see the need for a safe haven as the U.S. Dollar has gained in value. The lowest trading level was reached on Friday, as gold closed at $1216.6 an ounce.

At the mean time, silver prices tumbled even lower compared to gold, as it lost 4.1% over the week. During the week silver held its positions relatively stable above $18.50 an ounce. However, the significant drop occurred on Friday, when the precious metal sank to a four- year low and closed at $17.84 an ounce. Also, the inventories have decreased slightly.

Platinum and Palladium both declined, 2.42% and significant 2.80% respectively. This retreat led to platinum falling to the lowest level this year on speculation over the strong Dollar and signs of slowdown in China will curb demand for raw materials. Additionally, its prices have decreased by 5.8% since the end of June, on pace for the biggest quarterly decline in more than a year, on sluggish economic growth in Europe, the region accounts for 25% of global demand.

Industrial Metals Drop on Weakening in China’s Housing Market

Aluminum lost 2.74% from its value in the week starting September 15th. On Monday the industrial metal plummeted below the $2000 mark, after industrial output in August expanded at the weakest pace since 2008 in China, the world’s top consumer. However, Aluminum managed to rebound in the next day on speculation that recent price declines were excessive. Then in the last part of the week the metal dropped again, after home prices weakened in China and as the U.S. Dollar appreciated after the Fed raised interest-rate estimates.

Copper remains the only industrial metal that did not post weekly losses; however, it also slid considerably lower at the first part of the week. The main catalyst for declines were the concerns on signs that housing markets are sputtering in China and the U.S., the two biggest users. Nonetheless, at the end of the week copper reversed previous losses and even added 0.14%. Copper closed at $6862.25 a metric ton on Friday. The metal’s inventories slipped 1.34%, increasing the 40% drop in the last six months.

Nickel and Zinc dropped 3.43% and 0.1% respectively, posting a second straight weekly losses. Nickel extended its losses on speculation that a ban of ore exports will not be enacted in the near time by the Philippines, the largest supplier to China. However, Zinc reached $2268.25 a metric ton, while its LME inventories slid 0.25%. Also, nickel and zinc were mostly impacted by the poor data from China, as the country is the top user.

Energy Futures Mixed on Increasing U.S. Supply

WTI oil and Brent Oil rose slightly, as they added 0.15% and 0.44% respectively. After a poor performance in the week from 8th to 12th September WTI oil started the last week considerably better. On Tuesday U.S. oil futures rallied to a one-week high, as investors awaited key weekly supply data to gauge the strength of oil demand from the world’s largest consumer. Also there were reports that global oil cartel OPEC may trim output, while talk of fresh unrest in Libya also boosted prices. Although, on Wednesday oil prices started to slide, after data showed that oil supplies in the U.S. increased unexpectedly in the week before. Moreover, the U.S. government forecasters stated that U.S. crude production will jump to a 45-year high next year, lowering prices and reducing the need for imports.

Natural gas fell 0.52%, after bearish U.S. supply report. Gas prices posted gains on Wednesday on both warm and cool weather forecasts that could drive demand for air conditioning and heating, respectively. However, the upcoming days were mostly bearish for the commodity. On Thursday natural gas declined after data showed that U.S. stockpiles surpassed the five-year average. While on Friday the prices were dragged lower after updated weather forecasts that called for mild temperatures for a solid portion of the U.S. into early October, which could possibly decrease demand for both conditioning.

Heating oil similarly natural gas retreated 0.87%. According to PJK International BV, combined inventories of diesel and heating oil in Europe’s oil-trading center, have reached their peak since March 2012. While Heating oil storage tanks at commercial storage in Germany are 37.7% full.

Agriculture Futures Drop on Estimated Record Output

Wheat futures continued its slump, in the week from 15th of September the grain product dropped 5.57%, as ongoing optimism over domestic and global grain supplies weighed. On Thursday wheat futures reached the lowest trading level in four years on speculation that rising global production will curb exports from the U.S., the world’s biggest shipper. According to the U.S. Department of Agriculture forecasts, wheat output outside the U.S. will increase to a record 664.71 million metric tons this year, boosting reserves by 4.1% to the highest level since 2002. According to Farm Futures magazine, there will be more than enough wheat to meet the demand, and until we get a big disaster around the world that would limit supplies.

At the mean time, Corn lost 2.07% of its value. According to USDA forecasts, corn output will raise 3.4% to 14.395 billion bushels compared to previous year. Corn prices continuously fluctuated around the lowest levels since 2010 as crop conditions in the U.S. improved, fueling expectations that this year’s production will be the highest ever.

Soybeans decreased 2.87% after the U.S. soybean fields got more than twice the normal rainfall in August. According to USDA estimates, this fall’s U.S. harvest would reach an all-time high of 3.913 billion bushels. The overall situation among the agriculture investments worsened on possible record crops.

Coffee futures retreated 3.55% as Vietnamese farmers unsold inventories of significant 84,000 tons; moreover, by the end of the trading week the prices were at $1.78 a pound, reaching a two-month low.

EXPLANATIONS

Commodities

• Gold - COMEX active contracted (USD/t o.z.)

• Silver - COMEX active contract (USD/t o.z.)

• Platinum - New York Mercantile Exchange active contract (USD/t o.z.)

• Palladium - New York Mercantile Exchange active contract (USD/t o.z.)

• Aluminum - Active contract of primary aluminum of minimum 99.2% purity at the LME (USD/MT)

• Copper - Active contact of electrolytic copper at the LME (USD/MT)

• Zinc - Active contract of zinc od minimum 99.995% purity at the LME (USD/MT)

• Nickel - Active contract of nickel of 99.8% purity at the LME (USD/MT)

• Crude oil - light, sweet crude oil active contract on the New York Mercantile Exchange (USD/bbl.)

• Brent oil - Brent oil active contract on the ICE Futures Europe (USD/bbl.)

• Natural Gas - natural gas active contract on the New York Mercantile Exchange (USD/MMBtu)

• Heating oil - heating oil active contract on the New York Mercantile Exchange (USD/gal.)

• Wheat - wheat active contract on the Chicago Board of Trade (cents/bu)

• Corn - corn active contract on the Chicago Board of Trade (cents/bu)

• Coffee - benchmark Arabica coffee active contract on the NYB-ICE Futures Exchange

• Soybeans - active contract on the Chicago Board of Trade (cents/bu)

Indices

• S&P GSCI Precious Metals Total Return Index - commodity group subindex composed of gold and silver; the index reflects return on underlying commodity futures price movement

• S&P GSCI Industrial Metals Total Return Index - commodity group subindex composed of futures contracts on aluminium, copper, lead, nickel and zinc

• S&P GSCI Energy Total Return Index - commodity group subindex composed of futures contracts on crude oil, Brent oil, RBOB gas, heating oil, gas oil and natural gas

• S&P GSCI Agriculture Total Return Index - commodity group subindex composed of futures contracts on wheat, red wheat, corn, soybeans, cotton, sugar, coffee and cocoa

Indicators

Long-term price forecasts-aggregated price forecasts based on predictions of 20 international banks forecasts

USDA Wasde Total Estimated Inventories (Today)-current level of inventories of wheat in 1000 MT, corn in 1000 MT, soybeans in million bushels and green coffee in 1000 bags