Commodity markets are trading higher today following stronger than expected employment numbers from the US yesterday, making gains despite the strong performance in the greenback the buoyant economic data brought with it.
The crude oil market has seen additional support today, following the bullish US Department of Energy (DoE) inventory data published by the Energy Information Administration (EIA) yesterday. The data showed crude stocks falling by 4.2 million barrels (mbls) last week, almost double expectations. This means stocks have fallen by 24.4mbls over the past five weeks, the largest drop since 2008, although much of this can be attributed to stronger demand from refineries as they scaled down their stocks ahead of the year end tax audit. Yesterday’s data showed gasoline stocks rising 3.3mbls, while middle distillates climbed 1.1mbls and refinery run rates edged just 20 basis points higher to 88%.
Despite a strong performance in the US dollar today on the back of the positive economic numbers from the US, the precious metals complex is managing to squeeze out some gains, although these have eased off a little before the North American markets opened.
On the technical front gains in spot gold are seen being capped by the 55-day moving average today at $1,378/oz, while the sideways trading pattern of the last three months has yet to be broken in either direction – the $1,387/oz October high generally acting as an anchor for the rate in recent months. It is worth noting however that yesterday’s break through the 55-DMA is the first significant break of its kind during this period, and now does open up some potential for selling pressure through to the 100-DMA at $1,340/oz, while any additional selling could be expected to hit a base at $1,266/oz.
Base metals are seeing similar moves to the precious in today’s trade, although the impact of the floods and La Nina on Australia mining remains supportive, notably for lead after the Magellan mine was shut down yesterday. Lead prices gained good traction on the news yesterday, although as of yet any supply concerns can really be seen as unfounded, given stocks at the London Metal Exchange (LME) are at 15-year highs.
The Food and Agricultural Organisation (FAO) has confirmed that food prices rose to record levels last month, and concerns have been raised that some third world countries may see civil unrest similar to that of mid 2008 when food prices were at a high. The group warned prices could appreciate even further given the potential for extreme weather conditions already being played out in the Asia Pacific, Russia and India, and note that the current low inventory levels may add additional impetus to food prices.