Tuesday, May 5, 2009

Is it right time to buy commodities?

World recession and the decline of banking activities, which will still last probably a year and a half. This will result in a major deflationary pressures. With the purchase of commodities is therefore necessary to wait. How to develop crude oil, gold, copper and corn?

Some economic indicators showed a slowdown in global US decline, which arose some reasons for optimism. On the other hand, some other continue to surprise market with decline, which is seen on U.S. GDP data for the first quarter, which fell by -6.1%.

Equity markets have seen the biggest monthly gain since 1991. We would like to see the bottom of course, but economic activity continues to decline, albeit at a slower rate than at the end of last year.

It will be important to monitor the index of new orders to obtain evidence of a change in economic activity, while these indices do not offer many reasons to celebrate. Particularly important is whether the reserve bank, part of the money stock, which is now accumulating in the commercial banks are used to something. This would be a turnover. We saw that the lending activity, at least in the U.S. is reduced for six months, therefore, that this can continue for at least 1 a half years. Usually during recession lending activity is reduced at least two years.

On the basis of that, I believe that buying commodities at this time as a protection against inflation is far too early and the risk of deflation is much higher.

Oil continues to be trading around $ 50 a with a smaller volatility, which decreases each day. The current band, which is defined by the trends of this year's high and low, points to the zone between 47.50 USD and 54.70 USD. The risk of decline is greater with a probability of return back to 45 USD.

The outbreak of swine flu has some implications for travel and can be a serious problem, since the season for car traveling in the U.S. begins at the end of May. At present, however, these negative messages, which appear in addition to the economic crisis had only limited influence, if stock markets rose and the dollar weakening things went the opposite direction.

Gold this week has been pushed below the growth in global stock markets, when the pig flu failed to stimulate the momentum up. It was the first time the loss lasted two months in a row, from April 2008, mainly due to investor lower demand when their attention turned to other asset classes.

We should be careful to use gold as a hedge against inflation because we expect that in the near future will be a major problem of deflation. Technically, the business of gold futures for delivery in June to continue trading in the channel down to the band, which is currently located between 865 USD and 915 USD.

The divestiture of copper over the past two weeks, apparently impressed a strong demand for the July futures trades back to the level of $ 190. Month ago long large purchases of Chinese State Bureau (STB) moved prices above and purchases have now become visible, when the London Metals Exchange (LME) noted that in Asian stores are the lowest level of stocks in four years. Falling stocks level with growing equity markets declined somewhat concerned that the economic downturn will reduce demand for metals. Technically, it appears that the July copper will buy slightly below $ 200, with a view to 210 USD, followed by 216 USD, which is 200 days moving average.

Markets in the U.S. grain and oilseeds during the week ranged. The first outbreaks were heavily damaged by swine influenza, then there was a strong recovery when the delay in planting this season because of wet weather. Soybeans were supported, moreover, when Argentina fell estimate the size of its production.

Next week could become very interesting for the industry, because corn and soybeans are near important resistance levels. July corn could break the long-term trend down, and rise above U.S. $ 417, and then be directed to 447 USD. July soybeans tested 200 days week moving average and closing above 1064, which is trading at the time of drafting this report, and could have a goal in 1076 and the 1135.

There are only few changes in total commodity performance. Copper is still in front with a yield of 50%, while natural gas is firmly held by the bottom and in 2009 has lost 39%.


1 Response to "Is it right time to buy commodities?"

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