Precious Metals: Silver drops on falling ETF holdings
Precious metals were mixed on Wednesday after the Fed announced no changes to its loose monetary policy. Broadly weaker greenback also provided support to precious metals. Pushing the commodity sector lower, concerns over Cyprus started to alleviate thus dampening safe-haven appeal of the commodity group.
Gold dropped as a recent increase in prices weighed on physical demand. The US Mint sold 36,500 ounces of the yellow metal so far this month. At this pace, total gold sales for March would post an annualized decline of 12%. However, a slight increase in gold holdings in ETP on Tuesday limited losses of the yellow metal.
Silver dived on signs that investment demand weakens. On Tuesday, silver assets in iShares Silver Trust, the largest exchange traded fund backed by silver, declined 105.3 metric tonnes, the biggest fall in almost two months.
Platinum and Palladium rallied amid weaker US Dollar and eased worries over Cyprus bailout. The precious metals also were boosted by hopes that accommodative monetary policy by the Fed will increase car demand in the US. Moreover, persistent deficit on the physical market continued to lend support for platinum group metals.
Industrial Metals: Copper rose as strike in Chile threatens shipments
Industrial metals were bullish on Wednesday ahead of China’s HSBC flash manufacturing PMI release due on Thursday. Experts predict PMI to expand to 51.2 from 50.4 in the previous month. Moreover, decision of the Fed to leave its loose policy unchanged supported the commodity sector.
Aluminum rose on expectations of production cuts and rising premium paid on the physical market amid lack of metal available for immediate delivery. At the same time, elevated inventories at the LME and SHFE restricted gains.
Copper bounced off seven-month low on stronger demand for risky assets after the Fed left its policy unchanged. Pushing the metal higher, a strike in Northern Chile is resulting in shipment delays that may spread to other ports in the country.
Nickel soared as cancelled warrants at the LME rose signaling an increase in physical demand. At the same time, surplus on the physical market and rising stocks limited an upward trend of the metal.
Zinc traded higher amid weakness in the US Dollar and higher cancelled warrants ration at the LME. Meanwhile, zinc stocks at the LME dropped 2,225 tonnes on Tuesday after jumping 9,000 tonnes last week.
Energy: Brent oil surges on inventory data; EIA outlook cuts gains
Energy futures except for natural gas moved higher on Wednesday after the EIA supply report indicated an unexpected drop in crude oil inventories last week. Furthermore, calming worries over Cyprus bailout as well as continuation of the growth-boosting measures by the Fed lifted the commodity sector.
Crude and Brent oil advanced after the EIA report showed a drop in US inventories last week. US stockpiles declined 1.3 million barrels last week compared to a forecast of a 1.8-million-barrel increase. However, the upswing was capped by the EIA short term energy outlook. The EIA expects US oil production to exceed imports by two million barrels per day by 2014.
Natural gas was the only loser as markets priced in forecasts of colder-than-normal temperatures in the most US territory. Meanwhile, market players were cautious ahead of the EIA inventory report due on Thursday. Experts predict the report to show a 70-bilion-cubic-feet decline in the US stocks last week.
Heating oil jumped despite smaller-than-expected decline in the US distillate fuel inventories. US storage dropped 700,000 barrels last week, while analysts projected a 1.5-million-barrel decline.
Agriculture: Corn jumps as cold weather slows planting
Farm commodities followed bullish trend on Wednesday as fears over Cyprus waned boosting demand for riskier assets. Moreover, signs of stronger demand for US grains as well as concerns over rain forecasts in Brazil pushed the commodity sector higher.
Wheat rallied on talks that wheat’s price discount to corn may result in an increase in demand from livestock producers. Iraq and Jordan are set to issue tenders to buy wheat implying that global demand for the grain is rising.
Corn rose as colder temperatures kept an upward pressure on corn futures. Unfavorable weather conditions in Iowa, Illinois and Nebraska are preventing farmers from tilling. Additionally, an improvement in the US ethanol production supported the grain futures.
Sugar climbed as above-average and frequent rainfalls in Brazil in Q2 are likely to disrupt harvesting of this season’s sugar cane crop in the Center South. Celso Oliveira reported Brazil would face rains 30% above the historical level.
Coffee inched up despite high Brazil’s inventories. Currently, between 30% and 40% of the least year’s harvest is still in warehouses.
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
