Rising Supplies Tarnish Copper
Copper – Copper extended its recent slide on rising LME warehouse stocks and increased production. In a year marked by worker turmoil, order seems to have been restored on the labor side for the most part, which should help boost output barring anything unforeseen. Weakening global demand – especially in the U.S. housing sector – does not appear to be on the rebound and Copper traders fear the Chinese government may intervene with higher interest rates in the early part of 2008, which could further trim demand. Despite the numerous bearish factors surrounding the market, traders were given some hope last week with strong GDP and payroll data showing that the economy may be in better shape than previously thought. The Chicago PMI data was less encouraging, however, posting a sub-50 reading to suggest contraction of the manufacturing sector. European factories may stimulate demand, as the sagging Dollar could attract buyers looking to capitalize on relatively cheap commodity prices. Copper is slightly higher this morning on expectations that inventories will be worked down due to increased demand. December Copper seems to have some support around 330 after sliding from the 375 area a month ago. The 18-day moving average crossed through the 50-day average, which is bearish longer-term. Momentum is a very bearish -0.311 and the RSI is an oversold 22 percent, which suggests today's rally may be a technical bounce due to some profit-taking. Support comes in at 325 and 305, while resistance can be found at 342 and 355.
Gold – Gold managed to post modest gains in a turbulent trading session to close at record highs. The Gold market also detached itself from the energy sector, which posted losses across the board. Energies and treasuries were out of favor yesterday due to technically overbought levels and easing political tensions, setting up the precious metals sector the safe haven de jour. The banking sector has been hit hard by the mortgage crisis and a correction in the stock market which, coupled with low interest rates, could keep the Dollar depressed and thus aid Gold prices. Gold continues to edge higher this morning on a weak USD and rising energy prices. Gold remains bullish on the daily chart, rocketing to the highest levels since 1980 in early trading. The market appears overbought at the moment, but this hasn't dissuaded traders. Momentum continues to climb higher and there was a bullish crossover of the ADXR indicator, suggesting the possibility of further upside. Support has been solidly established at 800 and 780, while resistance may be found at 835 and 850.
Bean Oil – With Crude Oil and Gold prices soaring, Bean Oil has been off of the radar for many traders while the market has quietly made a run to new highs. Increased bio-fuel demand and a weak Dollar leading to higher export demand have fueled the market recently, as has the strength in Soybean prices. Worries that the USDA will show increased production may weigh on the market in the coming days and restrict upward price movement. This figures to be a volatile week in the grain markets ahead of Friday's report, as traders readjust their positions. December Bean Oil remains bullish on the daily chart and the market is breaking out above the 42.75 resistance area in overnight trading. Momentum is starting to turn somewhat flat, which could signal further consolidation or, possibly, a small correction. The RSI is also showing overbought readings, which may hamper upside price action. Stochastics have crossed to the upside, which is bullish near-term. Support comes in at 42.00 and 41.00, while resistance may be found at 43.33 and 44.00.
Rob Kurzatkowski, Commodity Analyst
