COMMODITY ROUND-UP

Gold - Both investment demand and jewelry demand will send the price of spot gold through $1,000 per ounce, so says the World Gold Council. Well what else should you expect them to say? They’re an industry advocate! According to their observations, mining production has been falling at a 5% pace per year since 2001. if demand remained constant, that would be enough to send prices higher, they said. We find gold a most frustrating investment at present. The price of September gold closed on the retreat today at $935 per ounce as equity markets rallied and the Japanese yen declined. The yen is often used as a source of protection against market turmoil and especially when the dollar falls.

Dollar – The dollar had a mixed day, rising sharply against the Japanese unit as the pace of unemployment claims remained at a lower average pace in July than in June.  The dollar didn’t fall as much as one might expect given the surge in stock markets. Is something afoot as the equity market at least says recovery is underway. Under many analysts’ scenarios, the dollar will turn to dust when its safe haven mantle has worn out its welcome. Not happening this week!

Soybeans – Forgive us for back tracking, but screw the weather conditions, Chinese demand is responding to the lower prices those recent warm, wet days have brought regardless of prospects for a bumper crop. The real strong demand for beans caught the market off guard and suddenly dancing to a different beat after the recent supply side prospects picked up the pace. Final real demand from China – after auction failure news yesterday  - caught shorts on the hop. All of a sudden the strong Chinese demand is making traders realize that China will import as much of what the U.S. has to offer if the price is right. Apparently we just reached that point forcing both corn and beans to the biggest price rise since October.

Cotton – China, China, China – that’s all you could hear from the cotton pit after the bean and corn export excitement. The rally spilled over in to cotton where traders estimated that demand would return courtesy of the Chinese urge to stitch textiles together. With December cotton at 60.38 cents per pound, some are suddenly predicting a further 20% gain before year end.

Copper – Oddly enough, copper prices rebounded too adding 2.2% after several noteworthy events conspired to panic shorts out of the market. First, the Chinese Central bank responded to Wednesday’s 5% slide in stock prices by posting a notice to its website after hours promising that monetary policy would remain loose. Japanese industrial production added for the fourth straight month, while Eurozone business confidence added again helping to sour the recent decline for prices.

Crude Oil – Ongoing signs of a bulging supply-side picture for oil was insufficient to ward off buying as commodity prices across the board continued. Investors are unwillingly to fall for the fixation with over supply at a time when corporate earnings are not brilliant, but promise better things next quarter and through year end.

Bonds – Treasury notes rebounded in price, driving yields lower after a long-awaited seven—year note auction. Oddly, a recovering economy ought to be bad for yields and see them ramp higher in response. But all of the selling has, once again occurred ahead of this week’s auction.

Equities – Positive results from Visa and Mastercard proved that raising prices is still achievable. Many other companies appeared well on top of cost controls that are at the epicenter of a not-as-bad-as-expected earnings season. Stocks jumped and stayed higher.

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