Is commodity market consolidation offering a strategic accumulation opportunity?
*Financial Times, by Jack Farchy, July 5, 2011:
"At the end of 2008, the global economy was tipping into recession
and demand for raw materials fell through the floor.
Today, in spite of economic worries in almost every part of the world,
consumption of most commodities continues to grow -- in some cases,
strongly.
And yet investors have turned tail. Their positioning in US
commodity futures, as reported by the Commodity Futures Trading
Commission, is the least bullish since July last year.
From a peak in early April, bets on higher prices have fallen 37 per
cent on a net basis.
Nor is the shake-out restricted to futures markets: natural resources
executives say equity investors have reduced their exposure to the
sector as a whole; they have also been trimming bets on the Australian
dollar, the strength of which is closely linked to commodity prices.
Investors are not, for the most part, going short and betting on
falling commodity prices. They are just getting out.
The number of contracts outstanding, or 'open interest,' in US
commodity futures contracts has also fallen to its lowest since last
summer, according to the CFTC.
Bullion blues
With worries about the global economy denting confidence in risky
assets, the one commodity that might be expected to shine is gold, but
it has not been immune to the commodities sell-off.
From a nominal all-time peak of $1,575.79 a troy ounce in May, it has
fallen 6.2 per cent to a low of $1,478 on Friday, and CFTC data show
investors sharply cutting their bullish bets. Analysts say gold
investors have become weary of economic turmoil after three years of
surprises. But a surge in demand from India and China is
supporting prices."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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