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Gains of Gold & Crude Turn to Losses

August 29, 2012 at 23:45 by Vladimir Vyun

Markets are volatile this week as traders are constantly changing their view on the trading environment. Crude oil and gold are a good example of that volatility: the commodities fell on Monday, gained on Tuesday and erased their gains today.

The Group of Seven nations called for oil-producing countries to boost their output as a measure to prevent a price spike because of supply disruption caused by Hurricane Isaac. Isaac itself contributed to the decline of prices as the storm not only diminished production, but also reduced consumption as refineries were stopped. On top of that, US inventories of crude unexpectedly rose last week, increasing by 3.8 million barrels to 364.5 million.

Gold felt pressure from positive fundamentals in the United States. Why did traders view the good news in a bad light? Because that means less incentive for the Federal Reserve to stimulate the economy, while stimulus talks were the major bullish factor for the precious metal. The US economy continued to grow in the last quarter, while pending home sales rose more than expected in July, proving that the housing market is in good shape. Housing was the major concern, after unemployment, of the US central bank.

Crude oil fell from $95.82 to $95.14 per barrel as of 23:25 GMT today on NYMEX. Gold declined from $1,667.28 to $1,657.14 per ounce on COMEX.

If you have any questions and comments on the commodities today, use the form below to reply.

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