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Tuesday, 17 March 2009 21:29:04 GMT
Written by Stefan Tifigiu, CFDTrading Research
Full Article

Crude prices rose to 3-month highs today on expectations of better OPEC compliance coupled with rallies in US equity markets pushed prices higher. Gold prices continued modest declines today following strong US equity market rallies.Silver continued to fall in value following gold’s decline.

Commodities - Energy

Crude Gains On Housing Starts Data And OPEC Pledge For Compliance

Crude Oil (WTI) $48.910 +1.560 +3.29%
Crude prices rose to 3-month highs today on expectations of better OPEC compliance coupled with rallies in US equity markets. Some supply-side strength was provided by comments from Algeria’s Oil Minister Chakib Khelil in which he stated OPEC would reach 95% compliance by its next meeting in May. Given the current compliance rate of only 80%, this increase in compliance acts as some support for oil prices in lieu of production cuts. Further price strength was provided by a better-than-expected US Housing Starts release that rallied equity markets across all sectors. Price swings were extremely volatile but most of the market noise could be more attributed to traders excercising options contracts on the final day of front-month April futures contracts. Market noise aside, fundamentals are still in favor of lower crude prices for the near future. Even with supply pressures that greater compliance from OPEC will provide in the coming months, there is still significant amount of crude already in the markets. Those stockpiles will take time to be absorbed. Even with worldwide market rallies that have lasted most of the week, global crude demand will remain weak until a significant tangible economic turnaround occurs. So far there is little evidence of this. Tomorrow’s DOE numbers may be market moving as they are expected to show increases and could perhaps signal even further oversupply. If stockpiles rise more than forecasted, bearish pressures will return to the market and place pressure on prices back toward the psychologically significant $40 level.



Commodities - Metals

Gold And Silver Continue Decline On Unexpected US Equity Rallies

Gold $916.450 -6.705 -.73%
Gold prices continued modest declines today following strong US equity market rallies. The Producer Price Index in the US rose less than expected and could have offset some growing concerns of future inflation that might have provided gold with some strength. However prospects for medium to long-term growth remain fundamentally strong. Much of the market rallies that have weakened gold were fueled by leaked memos and expectations of operating profits under current conditions. Nonetheless, there is very little in the way of evidence that fortunes at financial institutions have reversed. There is evidence to the contrary in Monday’s news of increased credit-card delinquencies. Growth in delinquencies hints at the growing risks of credit-card related securities that many financial institutions hold. Losses there could derail positive sentiment and reverse market momentum. The relatively modest declines in Gold may be evidence of this. In the meantime, if global markets continue to rally, gold will likely trade flat.

Silver $12.745 -.18000 -1.39%
Silver continued to fall in value following gold’s decline. As we noted earlier, silver may be poised for a much stronger rally than gold given its historically lagging gains. There is however significant potential for upside if there are any market moving reports released that could derail positive sentiment. If that occurs, safe-haven metals will benefit.


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