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May 22, 2006

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Retreat across commodities continues

"The retreat across commodity markets continued on Monday, extending last week’s sharp losses as increased risk aversion by investors prompted further selling.

“The move down (for prices) may have some more room to go, but we doubt that there will be a general ‘rethink’ of funds’ commitment to commodities,” said Edward Meir of Man Financial: “There is no compelling strategic reason for funds to exit commodities other than to take profits. That reason alone should not preclude them from getting back into the markets once prices have corrected.”

However, further declines in oil prices on Monday contributed to weaker investor sentiment across the commodity complex.

IPE Brent for July delivery fell 71 cents to $67.98 a barrel while Nymex June West Texas Intermediate shed 68 cents to $67.65 a barrel in electronic trade.

Traders said prices were testing support around the $68.20 level and that a close below that could pave the way for a further decline to the next major support at $65.80 a barrel.

Analysts at UBS said that following a lot of profit taking over the past two weeks, investors appear to be waiting for metals prices to stabilise before re-opening fresh long positions.

Gold futures on the Tokyo Commodity Exchange dropped by their 60-yen daily limit prompting a further decline in spot bullion prices in trading on the London Metal Exchange on Monday. Gold traded at $645.10 a troy ounce while silver was at $12.06 a troy ounce.

Traders said speculators and hedge funds were liquidating some of the large long positions they had built up in gold earlier in the year.

The latest data from the Commodity Futures Trading Commission showed that net non-commercial (ie speculative) long positions for gold in New York fell by by 6 per cent last week."

*This information is solely an excerpt of a third-party publication and is incomplete. Please subscribe to the referenced publication for the full article. 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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