Mixed News For The Commodities Futures Markets
Crude oil futures are trading higher again as the latest US economic data has provided some optimism on future crude oil demand
. A report on US manufacturing showed continued growth while a separate, more recent, report indicated that the American economy created more private sector jobs than initially anticipated.
Its not all one-way traffic though, according to Anthony Grech, of
IG Index, New worries about the strength of Europe's financial system may have resurfaced. If so that would stifle an uptrend in equities and oil. Why has this subject risen again? Well the Wall Street Journal reported that the recent Stress Tests on European banks was not entirely accurate.
The WSJ stated that its own studies showed that the official stress test report had underestimated some lenders holdings of certain risky government bonds. That has raised doubts about the true health of the Eurozones banking system.
Investors should watch out for the Energy Information Administrations (EIA) crude oil inventory report which is normally released on Wednesday. The recent reports have shown that crude oil and fuel stocks remain at 27-year highs.
According to a survey by Dow Jones Newswires, crude oil inventories are expected to rise slightly. Distillates inventories, which include heating oil and diesel fuel, should also see a slight rise. Note that Gasoline stocks may see a slight fall.
This higher-than-expected build up is likely to weigh on crude oil prices for some time. Whilst I am more inclined to be bearish on oil prices note that shorting the commodity does have its risks. If theres an active Atlantic hurricane season that could quickly help reduce the current oil supply glut.
Silver Trading
Silver continues its steady rise to the $20 mark. As David Choe of
IG Markets recently said, Silver tends to be grouped closely with gold, they are both used for jewellery and decorative purposes and both are considered to be a good store of value.
Nevertheless of the two metals Gold is considered to be a safe-haven metal that tends to outperform during periods of uncertainty. Indeed, Gold has outperformed Silver over the past 12 months amidst worries about the Eurozones economy. This explains why Silver has lagged behind gold over the past year.
Having said that, Silver is now beginning to catch up with the yellow metals performance. It is also likely to enter a phase of outperformance.
Silver is becoming increasingly important for its industrial use, a characteristic that gold does not share. Note also that demand for the white metal could increase as the world moves towards greener technologies and ever more energy efficient products.
Silver is considered to be the material-of-choice for solar reflectors. It also the best conductor of electricity, even more so than copper. Silver was never used extensively for electrical wiring in the past because it costs were relatively expensive, when compared to copper.
However, looking at Silver on a medium-long term basis, the upgrading of electrical grids across many major cities and the push for more hybrid cars, which require enhanced conductivity, may provide a fundamental boost for Silver demand. The metal also has medical applications and is used as a chemical catalyst.
All this suggests a rise in Silver prices. However Silver is a commodity and subject to the laws of supply and demand. If Silver gets ever more expensive then manufacturers are likely to seek alternatives materials. Not only that but the big silver mining companies will also increase production.
Note that with spread betting you can lose more than your original stake. Spread betting carries a high level of risk to your capital. Before trading, ensure it matches your investment objectives. Make sure you familiarise yourself with the risks. Seek independent advice where necessary.
by: Peter Jones
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