Precious Metals Reverse Losses on US Dollar and Equity Decline

Gold and Silver added solid 2.7% and 4.91%, respectively, to its value in the week from 8th to 12th of December, as equities declined. Already on Monday the metal started strong by climbing the most in a week, as the US Dollar and equities depreciated. However, the biggest jump was witnessed on Tuesday as demand for the precious metals increased as a safe haven asset. More than $100 billion were drawn out from the value of global equity markets and the declined continued on Tuesday. HSBC Securities stated that there are equity market concerns and an increase in the flight away from risky assets to quality and gold seems to be benefiting from that more than anything else. Then for the rest of the week gold and silver slid slightly lower, as a drop in oil prices fueled worries that inflation is likely to stay low. According to Commerzbank AG, a lower oil price reduces the inflation expectations, which is in turn negative for gold, after the sharp price rise on Tuesday, the marketplace is hesitant to put more money into gold at the moment.

Platinum gained 0.98% in the period; although, it performed calmer than other precious metals. The world’s second biggest producer of the metal, the Zimbabwean unit of Impala Platinum Holdings Ltd., will need three years to re-develop its biggest mine, after closing it following the underground collapse.

At the same time, Palladium added 1.73% in the week, after Glencore Plc. and Merafe Resources Ltd. reached an agreement with the National Union of Metalworkers of South Africa to end a pay strike last week.

Industrial Metals Prolong Their Retreat on Energy Sector’s Decline

Aluminum prolonged its decline to three straight weeks as it lost 2.81% in the period. The worries are growing about aluminum exiting warehouse that are tracked by the London Metal Exchange (LME) at the fastest pace in a decade. Thereby, the amount of information is decreasing substantially and the volatility could increase. According to Jefferies, what that means is the market is going to become less transparent, and that is a risk, as markets become less transparent prices could become more volatile and more vulnerable to big swings when inventory finally becomes visible to the market.

Copper managed to rebound from the weak performance at the beginning of the week, as concerns that China’s metals demand could wane dragged the price lower. However, in the later part of the period the price was boosted by improving US economy and on speculation that China will move to stimulate growth. On the last day of the week copper added to its gains as the US House narrowly passed a spending bill.

Nickel slid 0.78%, as it declined for five consecutive days, before reversed some of the losses on Friday. Nevertheless, the metal has gained 6.65% through the last month and it is the only industrial metal that has managed to do so.

Zinc fell almost as much as aluminum (2.34%); although, it also performed better in the second part of the week, as the Greenback performed relatively poorly, making the commodities priced in US Dollars more attractive to the investors.

Energy Futures Slump Continues as South Arabia Question Need of Cut

WTI oil has lost around 25% of its value during the last three trading weeks and it is a substantial drop; moreover, the price has declined below $60 a barrel mark. The main catalysts through the week was the US Energy Information Administration’s price cut by $15 a barrel, after OPEC’s decision to maintain output as North American oil output climbs, also amid concerns that money managers (funds) bet too much on increasing prices. According to Saxo Bank A/S, the near-term risk is for additional long-liquidation and the belief is spreading that we could hit $60 or even lower before this stabilizes. Moreover, Saudi Arabia stated that its priority is defending market share and continued to question the need to cut output, pushing the price of oil even lower.

Brent Oil slumped 10.45% in the week and also prolonged its decline to three consecutive weeks. Additionally, it reached the lowest level in five years. According to Tradition Energy, Fears about a global supply glut and weakening demand continue to weigh on the market and you have OPEC lowering its demand forecasts and the EIA lowering prices, it doesn’t look like we’ve hit the bottom.

Natural gas decline has stopped, after updated weather-forecasting models called for a return of colder weather temperatures by the end of December that will fuel demand for heating.

Heating oil dropped 4.36%, after losing more than 10% in the last two weeks on a milder weather. According to FCStone Latin America LLC, the projections for the first part of the month are bearish, it is really a weather market and the anxiety level’s not high yet.

Agriculture Futures—All but Coffee Increase In Value

Wheat gained for a third straight week by adding 2.10%. Australia’s government said that wheat shipments from the country will most likely slide to the lowest level in last five years due to the dry weather that has curbed supplies in the world’s fourth biggest exporter. At the same time, French wheat is losing its market share in Algeria, as a wet summer decreased the quality of the crop, according to FranceAgriMer.

Corn futures rose the most among the agriculture commodities, as the price climbed 3.16% higher on Friday’s rally. Nonetheless, at the first part of the week the price of corn slipped, as USDA raised its forecasts for global crop supplies. AgriVisor LLC added that its only a confirmation on that what was already know—grain and soybean supplies are large.

Soybean futures grew 1.71% as the US Department of Agriculture cut its forecasts of 2014-15 soybeans ending stocks. The USDA expect that US soybean supply will reach 410 million bushels by the end of 2014-15 season, below previously estimated 427 million bushels. At the same time, Brazilian soybean growers are expected to produce a record-high 95.8 million metric tons of soybeans.

Coffee prices fell for a third straight week and 3.39% in the past week. INTL FCStone said that the drop in other commodities has given this market a negative tone and added to the volatility. Specialty Coffee Association of America stated that Robusta coffee production has grown every year, and it will continue to grow, but he thinks it would be a less wonderful world if we didn't have arabica coffee still with us.

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