Precious metals plunged on Wednesday after closely-watched FOMC meeting minutes showed that the Fed may ease or outright stop its bond-purchasing program before initially planned. Pushing the commodity complex lower, the US Dollar skyrocketed after the FOMC report. Meanwhile, market players continued to wait for fresh US data that may result in the Fed’s policy changes.
Gold plummeted on escalated concerns that the Fed may stop its bond-purchasing activities. However, hopes for robust physical demand from Asia after the Lunar New Year holidays limited a downward trend.
Silver plunged, following gold’s losses and appreciation in the US Dollar. Worries that the Fed may end its easing measures also pressurized the grey metal. At the same time, losses were capped by speculation lower prices may spur physical demand for silver.
Platinum and Palladium tumbled amid concerns the Fed may stop its accommodative policy. Moreover, lack of funds’ buying created heavy selling pressure on the metals. However, deficit on the physical markets and signs of rising car demand continued to support the metals.
Industrial Metals: Copper dives on potential housing curbs in China
Industrial metals followed bearish trend on Wednesday amid worries that the Fed may halt its growth-boosting activities. Stronger greenback coupled with weaker-than-expected data from the US housing market also contributed to the decline. Moreover, subdued buying from China pushed the commodity complex deeper into the red territory.
Aluminum declined amid weak US data and worries that the Fed may end its bond-buying program. The lightweight metal also came under pressure from elevated LME inventories that continued to hover near a record high of 5.24 million tonnes.
Copper slid to a four-week low on worries over fresh property curbs in China. Adding pressure, stocks monitored by the LME reached the highest level since November 2011, while cancelled warrants ratio approached a seven-month low.
Nickel declined despite increasing orders to withdraw the metal at the LME. Solid greenback and weak appetite for risky assets also weighed on the metal.
Zinc plunged after the data showed that global surplus attained 256,000 tonnes in 2012, marking the sixth consecutive year of supply glut. Furthermore, producers’ and exchanges’ inventories surged by annualized 24.1% last year.
Energy: Brent oil retreated after FOMC meeting minutes
Energy futures apart from natural gas retreated on Wednesday after the FOMC meeting minutes showed that the Fed may stop its easing measures. Meanwhile, market players continued to anticipate the EIA inventory report due on Thursday.
Crude oil slumped the most in three months after the American Petroleum Institute reported US stocks rose 2.96 million barrels last week, reaching the highest level since December. At the same time, experts predict the EIA report to show a 1.9-million-barrel increase in the US inventories last week.
Brent oil closed in the negative territory on concerns that the end of the Fed’s bond-buying program will weigh on energy demand of the world’s top consumer. However, persistent tensions in the Middle East limited losses.
Natural gas was the only gainer, drawing strength from colder weather forecasts in the US. Meanwhile, analysts say the upcoming EIA report may show a 119-billion-cubic-feet drop in the US stockpiles.
Heating oil moved lower after the data released by the American Petroleum Institute indicated that US distillate fuel stockpiles declined 1.64 million barrels last week.
Agriculture: Corn bounced off amid Argentina’s crop concerns
Farm commodities advanced on Wednesday despite weak demand for risky assets after FOMC meeting minutes’ release. Broadly stronger US Dollar also failed to send rural commodities lower. The commodity group gained momentum on speculation China may increase its purchases after the Lunar New Year holidays.
Wheat climbed amid global output concerns. Wheat output in Texas is expected to drop below the normal level because of drought during fall and winter. Moreover, Indian harvest is likely to decline 3% in 12 months, starting from April 1.
Corn rebounded, being boosted by sharp gains in soybean futures. Additionally, corn futures saw some support from weather conditions in Argentina as some weather services providers claim rains last week were below expectations.
Sugar was bullish on speculation that investors will buy the sweetener as net short positions approached a record of 90,426 contracts. Lower sugar prices started to raise ideas that Brazil will direct more sugar cane to produce ethanol.
Coffee soared on Central American crop concerns. Production in Honduras, Guatemala, Costa Rica, Nicaragua, El Salvador and Mexico may decline 20% this year and 25% in 2014 because of spreading coffee leaf rust.
EXPLANATIONS
Commodities
Gold - spot 995 fine gold
Silver - spot 999 fine silver
Platinum - spot platinum with minimum purity 99.95%
Palladium - spot palladium with minimum purity 99.95%
Aluminium - three-month forward contract on the London Metal Exchange
Copper - three-month forward contract on the London Metal Exchange
Zinc - three-month forward contract on the London Metal Exchange
Nickel - three-month forward contract on the London Metal Exchange
Crude oil - light, sweet crude oil active contract on the New York Mercantile Exchange
Brent oil - Brent oil active contract on the New York Mercantile Exchange
Natural Gas - natural gas active contract on the New York Mercantile Exchange
Heating oil - heating oil active contract on the New York Mercantile Exchange
Sugar - white sugar active contract on the Chicago Board of Trade
Wheat - wheat active contract on the Chicago Board of Trade
Coffee - benchmark Arabica coffee active contract on the NYB-ICE Futures Exchange
Corn - corn active contract on the Chicago Board of Trade
Indices
Dow Jones-UBS Precious Metals Subindex Total Return - commodity group subindex composed of gold and silver; the index reflects return on underlying commodity futures price movement
Dow Jones-UBS Industry Metals Subindex Total Return - commodity group subindex composed of futures contracts on aluminium, copper, nickel and zinc; the index reflects return on fully collateralized futures positions
Dow Jones-UBS Energy Subindex Total Return - commodity group subindex composed of futures contracts on crude oil, heating oil, unleaded gasoline and natural gas; the index reflects return on fully collateralized futures positions
Dow Jones-UBS Agriculture Subindex Total Return - commodity group subindex composed of futures contracts on coffee, corn, cotton, soybeans, soybean oil, sugar and wheat; the index reflects return on fully collateralized futures positions
Chart
SMA (20) - Simple Moving Average of 20 periods
SMA (60) - Simple Moving Average of 60 periods
Correlation - a statistical measure of the linear relationship of two random variables. It is defined as the covariance divided by the standard deviation of two variables
Indicators
Daily Ranked Price Moves - daily price changes in an ascending order for positive changes and in a descending order for negative or mixed changes
Monthly Ranked Price Moves - monthly price changes in an ascending order for positive changes and in a descending order for negative or mixed changes
