The good, the bad, and the Fed

Energies: September crude oil (NYMEX:CLQ14) closed at $97.88 per barrel, down 29c and for the week lost 4%, its largest decline in seven months. Inventory data prompted the long liquidation and for the month of July, prices lost 6.8%. The improved manufacturing data from China kept prices from declining further as the expectation for improved demand from that country could prompt shortcovering. We prefer the sidelines.

Precious Metals: August gold (COMEX:GCQ14) closed at $1,293.60 per ounce, up $12.30 but for the week lost 0.7%. September silver (COMEX:SIQ14) closed at $20.37 per ounce, down 4c but having performed better than gold during the week it was to be expected. We prefer the sidelines in precious metals. October platinum closed at $1,465.70, per ounce, up 5c while September palladium lost $8.05 to close at $865.65 per ounce. We had favored palladium over platinum and that worked well until Friday. For now we prefer the sidelines in the group. With global events and concerns, gold should have fared better as a possible "safe haven" as in the past. It’s failure to do so left us out "in the gold, I mean cold". Stay out for now.

Grains and Oilseeds: There is no getting away from the fact that this group remains under pressure from supplies and production. We have no comment other than to provide prices. September corn (CBOT:ZCU14) closed at $3.51 ¾, down 5 1/4c. September wheat managed a slight gain on Friday to close at $5.34 ½ per bushel. September soybeans lost 25 3/4c per bushel to close at $10.74. Stay away until the next USDA report or further information from other producing countries like Brazil and Argentina among others. Bear in mind that the "usual customers" in Middle East have their own problems and could impact demand.

Coffee, Cocoa and Sugar: September coffee (NYBOT:KCU14) closed at $1.9210 on Friday, down 2.95c on profittaking after its recent rally from the July lows around $1.59. Brazilian crop damage prompted CitiGroup to lower its forecast for this years output and could result in crop losses caused by drought of some 20-30%. We could see prices breach the $2.00 level and possibly up to $2.250-$2.50. We like coffee but stop protection a must from here. September cocoa closed at $3,202 per tonne, down $17 also on profittaking after its recent rise from the May lows around $2,800 per tonne. With the European cocoa grind down 0.2% in the April to June quarter, I expect a correction possibly back to below $3,000 per tonne. I would not be short however so for now we like the sidelines. October sugar closed at 16.3c per pound, down 16 points and remains on our "no interest" list.

Cotton: October cotton closed at 62.78c per pound, up 69 points on shortcovering after recent bearish estimates from various analysts. We will await the next USDA crop report on August 12th before making any assessment for price direction. For now even with the decline from the May highs around 84.8c we prefer the sidelines.

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About the Author
John Caiazzo

John has over 40 years experience at major U.S. Brokerage firms as Manager and Director of various International Divisions and is the founder of his own trading and brokerage firms. Over the years John has gained a wealth of knowledge and experience in all aspects of investments and trading. He was also a floor trader at the Commodity Exchange in New York. He formed Acuvest in 1999 and can be reached at futures@acuvest.com.

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