“The world is awash in liquidity,” said Schenker, who was the third-most accurate forecaster for industrial metals in Bloomberg Rankings the past eight quarters. “You’ve got a bunch of hammers out there looking for some nails. People need to put this money somewhere.”
Investors pulled $636.2 million from commodity funds in the week ended April 11, the most since early January, according to Brad Durham, a managing director at Cambridge, Massachusetts- based EPFR Global, which tracks money flows. Gold and precious metals outflows totaled $290.3 million, the biggest exit since Dec. 28, he said.
Minutes from the Fed’s March policy meeting, which were released on April 3, showed policy makers will probably hold off increasing monetary accommodation unless the U.S. economic expansion falters. Crude oil, copper, nickel and cotton may decline “in the absence of further injections” of stimulus measures, UBS analysts led by Hong Kong-based Peter Hickson said in the report April 12.
Goldman Sachs Group Inc.’s commodity research team, led by Jeffrey Currie in London, cut its three-month recommendation on raw materials to “neutral” on March 28, saying that the economy will “soften” this quarter.
Money managers reduced their bullish bets on copper by 15,687 contracts to 2,955 as of April 10, the CFTC data show. That’s the lowest since funds were net-short, or betting on declines, in January.
The value of Chinese homes sold dropped 18% in the first three months of the year, the government reported April 13. Construction generates about 40% of demand for the metal, according to the Copper Development Association. Stockpiles monitored by the Shanghai Futures Exchange rose to the highest since at least 2003 on March 15 and have more than doubled this year.
A measure of 11 U.S. farm goods showed speculators lowered wagers on a rally for agricultural commodities by 4.9% to 669,280. Holdings fell for a third week, the longest slump since December. Speculators have a net-short position of 2,561 contracts in cotton, compared with net-long bets of 7,296 contracts a week earlier.
Sugar wagers dropped 9.4% to 107,232, the lowest in four weeks. Sixteen of 22 analysts expect prices in New York to decline next week and one was neutral, according to Bloomberg’s weekly sentiment survey. The traders were bearish for a seventh consecutive week, the longest stretch since at least 2007, when the surveys began.
“There’s more concern now over the possibility of a global recession,” said James Dailey, who manages $215 million of assets at TEAM Financial Management LLC in Harrisburg, Pennsylvania. “It’s quite difficult to navigate trading in commodities right now because things are going to have to get worse before policy makers step in.”