As with other asset classes, all eyes in the commodity markets are on the forthcoming Fed quantitative easing announcement due up today, with the uncertainty and the weakness it is bringing to the greenback, helping to underpin some mild gains in benchmark prices. Volumes are thin however as traders wait on the sidelines, and yesterday’s midterm results offered nothing unexpected to shake up the FX market, although unrelated, raw sugar was able to peak at a 30 year high in floor trade yesterday. The price of raw sugar topped $0.3012/lb in yesterday session, as concerns surrounding dry weather in Brazil and the potential for it to damage next years sugar crop, boosted the commodity. It also comes on news that the sugar cane harvest in the first half of October was 30% lower than the same time last year, although this should be took in context that 25% more sugar has already been produced from Brazil this year than last. This also comes after the official announcement by India recently that they are likely to allow sugar exports next week, expected to be in the 2 to 3 million tonne range, bringing about the potential for some supply pressure easing up on the global markets. WTI Nymex crude has hit a 6-month high in electronic trade today, helped not only by the weak dollar and thin volumes, but following on from yesterday’s American Petroleum Institute (API) weekly inventory numbers, which showed a surprise 4.1 million barrel (mbls) fall in crude stocks, a 3.2mbls fall in gasoline inventories and a 4.7mbls fall in middle distillates. The combined fall across the board does go someway to indicating the numbers represent a short-term technicality rather than a changing fundamental picture in any of the markets, although it does now bring focus to today’s more extensive US Department of Energy (DoE) inventory numbers, released by the Energy Information Administration (EIA) at the normal time of 1030EST. As one would expect, the precious metals complex particularly is watching for the forthcoming QE announcement today, with any moves in the dollar and uncertainty surrounding the impact on the US economy, set to have a large impact on gold prices going forwards. On the technical front the 21-day moving average has continued to underpin support for the yellow metal, today at $1,350/oz, with any upward push likely to meet resistance at the all-time high near $1,387/oz. similarly a break and close below the 21-DMA opens up sell pressure down to the July high at $1,265/oz. With both 10-day momentum and the daily stochastics showing a more neutral picture, any surprise announcements by the Fed today are likely to trigger a move for gold one way or the other. Base metals are following the lead of the precious complex in today’s session, with all markets relatively quiet as caution dominates ahead of the Fed announcement. The potential for a return to annual negotiated iron ore prices is looking unlikely today as the 2011 iron ore negotiations between Chinese steelmakers and major international iron ore suppliers get underway, as analysts and market players alike, are suggesting the introduction of the new mechanism all but makes it impossible to go back to the annual method. The Brazilian miner Vale, said it will no longer announce iron ore prices alone, with their iron ore prices set at the end of each quarter, based on the average price over the preceding three months.

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