Daily Commodities Report: August 23rd

BinaryOptionsNow | Published on August 23, 2011 at 11:01 am

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Here is our daily Commodities report:

  • Crude

In recent weeks, a flow of disappointing macroeconomic data from both developed and developing economies triggered a correction in crude prices. Fears from recession have particularly weighed on the US benchmark WTI which even hit lowest levels since autumn 2010.

Regarding the latest events, the eye-catcher undoubtedly is the fact that a civil war in Libya is likely approaching its end.

According to OPEC monthly oil market reports, the country produced about 1.6 million barrels per day of high quality (sweet and light) crude oil in 2010. Even though the time needed to restore full production is estimated at about two years, output of 1 million barrels per day might be achievable within a few months. Hence, apart from a slowdown in global economic growth, there might be another reason for lower oil prices.

  • Base Metals

Worsening macroeconomic indicators have also weighed on base metals prices. In July, China’s HSBC PMI even dipped below 50 points (49.3), i.e. below level, which indicates a contraction in economic activity. Even though that the same index for August reached 49.8 points, it still remains close to recession/expansion frontier. As a result, base metals prices have lost 14 percent on average in August and a short-end of copper forward curve turned into a contango.

  • Precious Metals

Once again, fears of recession and Euro zone debt woes have supported the price of gold. During the summer, the yellow metal gained more than 25 percent and reached multiple all-time highs (in nominal terms).

We believe that 2000 USD per troy ounce level might be a realistic outcome (see the chart) of the current market situation. On the other hand, we think that the price of the yellow metal will likely decrease in a longer-term as we do not believe in catastrophic scenarios.

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 Source: KBC

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