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Commodities Daily
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Correlation between gold and EUR/USD seems to have broken down in recent weeks
Wed, Nov 4 2009, 13:11 GMT
by Danske Research Team
Commodity news
- Most commodities are up this morning as equities are higher and the dollar has weakened against the euro. Oil rose close to USD80 yesterday as the API report revealed a draw in crude stocks last week. Gold has topped the highs of yesterday and is currently trading around USD1,090; notably, the correlation between gold and EUR/USD seems to have broken down in recent weeks (see chart).
- The recent surge in gold seems to be fuelled by speculation that central banks might increase their holdings of bullion for diversification purposes in a weakening dollar environment following India’s purchase of IMF gold. We have previously flagged the hypothesis that the bullion rally over the past month may be driven mainly by speculation, effectively creating a bubble fuelled by excess liquidity. However, the continued interest in gold suggests to us that there is more to the soaring prices: guesswork that China could be next in line for a bullion spree is clearly an important factor: only 2% of China’s USD2.3trn reserves are held in gold whereas 70% are dollar-denominated assets.
- Base metals apart have gained a few per cent overnight following a positive surprise in US factory orders which climbed 0.9% in September and on the back of unexpectedly high US car sales. Moreover, workers at BHP Billiton’s Spence copper mine in Chile failed to reach an agreement, suggesting that the strike is unlikely to be called off soon.
- The FOMC meeting later today will take centre stage but for the oil market the weekly EIA inventory figures should be interesting as well. The API data showed a rise in the already elevated stocks of distillates; this highlights risks to the consensus expectation for the broader EIA stocks to have declined last week.
Published on Wed, Nov 4 2009, 13:17 GMT
Archive
- Commodities rallied yesterday but have generally fallen back this morning
Published On Tue, Nov 24 2009, 13:03 GMT - Commodities have generally benefited from an increase in risk appetite overnight
Published On Mon, Nov 23 2009, 12:01 GMT - Still expect WTTI to hit USD90 within a three-month period
Published On Fri, Nov 20 2009, 13:08 GMT - Mixed movements in commodities this morning
Published On Thu, Nov 19 2009, 13:09 GMT - Commodities are up across the board this morning on the back of a slightly stronger dollar
Published On Wed, Nov 18 2009, 13:07 GMT
Danske Bank
| Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com
Legal disclaimer and risk disclosure
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.Related reports
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