Market Commentary
Key Notes: Equity markets continued their downward slide on Friday as fears of a global recession and concerns of European debt kept cautious buyers away. Wall Street marked a fourth consecutive week of losses. The S&P 500 has shed about 13% since August and is on track for its worst month since October 2008. Ahead, investors are awaiting Federal Reserve Chairman’s Ben Bernanke speech in Jackson Hole for clues on how policymakers may attempt to revive the faltering economy.
Gold rose to a new peak on Friday for its biggest two week gain since 2008. As gold climbs higher, do expect greater volatility that may not be for the fainthearted. Recall that spot gold traded with an intra-day range of more than $80 on 11 Aug. This is the third largest since 1983 and we could witness more of such volatile days ahead. The greater volatility could mean that the CME Group may raise margin requirements to trade gold.
Market Summary
Precious Metals: Spot gold rose to yet another record high as economic uncertainty continued to encourage safe haven bids for bullion. Trading volume for COMEX gold December futures topped 270,000 lots, the highest this week but below last week's pace. Gold has rallied more than $350 since the beginning of July and the strong rally prompted the CEO of Canadian gold producer Goldcorp to warn of a minor correction in gold prices before the end of this year even as the long-term outlook remains strong.
Base Metals: Copper prices edged up on Friday as supply woes and a weaker dollar buoyed sentiments. Workers at Chile's Collahuasi, the world's No. 3 copper mine, have threatened a one-day stoppage on Sept. 2 if the company does not hire back workers fired after a previous disruption. Inventories in warehouses monitored by the Shanghai Futures Exchange fell 7.3% from last Friday, raising expectations that destocking in China was under way.
Crude Oil: U.S. crude oil reversed earlier gains to end the day lower on Friday. In early trading, front month crude for September delivery rose to session highs of $83.55, boosted by a weaker dollar. However, crude came under pressure as equities turned lower. Also, investors took some preweekend profits and squared books ahead of the front-month contract's expiration on Monday. The CFTC reported that NYMEX crude speculators cut their net long position by 169 contracts to 142,769 in the week to Aug. 16,
Currencies: The dollar fell below 76 yen on Friday after a Wall Street Journal report cited Japan's top currency official saying Japanese authorities do not plan to intervene often. It later rebounded to end the day almost flat. The CFTC reported that currency speculators increased bets against the U.S. dollar. The value of the dollar’s net short positions rose to $13.55 billion in the week ended Aug 16 from $11.6 billion a week earlier.
