Precious metals dived on Monday on concerns that the Fed may end its bond-buying activities amid signs of economic recovery. At the same time, hopes for monetary stimulus in Japan and the Eurozone supported the commodity complex.
Gold traded lower as investors cut their holdings in ETPs by the most since 2008 in February. However, strong physical demand from central banks across the globe continued to limit losses. Also supporting gold prices, Indian government unexpectedly refrained from rising import duty on precious metals last month.
Silver slumped despite signs of robust demand in China. China’s silver imports rose by annualized 36% in January, the largest increase since May 2010, according to Barclays. Meanwhile, weakness in gold prices put heavy pressure on the grey metal.
Platinum and Palladium slumped amid mixed China’s imports data. The country’s imports of platinum surged 12% year on year in January, while palladium purchases slid 19% year on year. However, on a monthly basis palladium imports grew 49% in January. Furthermore, palladium may seek support from a 46% annual increase in car sales in China.
Industrial Metals: Aluminum plunges on rising LME stockpiles
Industrial metals apart from copper moved lower on Monday ahead of China’s annual legislative session due on Tuesday. Elevated LME inventories as well as persistent global surplus added pressure on the commodity group. Political instability in Italy also sent base metals lower.
Aluminum dropped as LME inventories continued to hover near a record high of 5.24 million tonnes. Moreover, weak PMI releases coupled with uncertainty over the Fed’s monetary policy weighed on the lightweight metal.
Copper bounced off a three-month low despite worries over demand from China, the world’s top consumer. China’s real estate sector curbs as well as slowing manufacturing activity are likely to reduce the country’s demand for the red metal.
Nickel retreated despite talks China’s demand for nickel ore may climb this year. China’s purchases of nickel ore are expected to soar 14% in 2013 on stockpiling ahead of Indonesian export ban due to take effect next year.
Zinc slumped despite positive China’s import numbers. China’s imports of refined zinc jumped by annualized 7.8% in January.
Energy: Brent oil declines on signs of weakening investment demand
Energy futures except for natural gas declined on Monday amid US fiscal uncertainties and slowing manufacturing sector in China. Investors continued to avoid risky assets ahead of USD85 billion in automatic spending cuts in the US due to come in force on Friday. However, escalated tensions in Libya restricted the downswing.
Crude oil slumped on weak demand for risky assets amid political instability in Italy and China’s annual legislative session due on Tuesday. However, broadly weaker US Dollar and unrest in Libya capped losses.
Brent oil tumbled on signs of weakening investment demand. Hedge funds and other money managers reduced their bets by 16.2%, the biggest decline in the number of contracts since August 2011.
Natural gas was the only gainer as forecasts called for abnormally cold weather in the most populated central and eastern parts of the US this week.
Heating oil moved in tandem with Brent and crude oil. An unexpected increase in the US distillate fuel inventories in the week ended February 24 continued to weigh on the commodity.
Agriculture: Corn retreats despite rising US exports
Rural commodities were mixed on Monday, with softs moving higher and grains retreating. Softs found support on fears over spreading coffee leaf rust in Central America and talks that Brazilian farmers will direct more cane to produce ethanol instead of sugar.
Wheat declined after the USDA reported that 24% of Kansas wheat crop was rated as good-excellent, compared to 23% a week ago. Moreover, MDA predicts snow in the US Midwest, which may further improve the soil moisture in the US top growing region.
Corn finished in red despite signs of solid demand for US supplies. USDA announced US exporters sold 120,000 tonnes to unknown destination.
Sugar advanced, drawing strength from talks that Brazilian farmers may take advantage of a potential tax cuts that would make it more beneficial to use cane for production of ethanol instead of sugar.
Coffee rallied amid a record number of short positions at a time when there are concerns over spreading coffee leaf rust in Central America.
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
