Saxo Group Videos

Commodities at new low as crude and corn drop

It's been somewhat of a rough week for commodities; the Dow Jones commodity Index has dropped to the lowest level in almost 3.5 years, whilst gold is set for its second weekly loss.

Saxo Bank’s Ole Hansen explains that gold is torn between continued tapering or potential return of growth. The ECB’s recent “surprise” rate cut triggered a rally, but the stronger GDP number out of the US sent gold back down again.

In terms of levels, Ole will be looking for support around the USD 1294 area and would not consider any short positions before we break that level.

Speaking about oil, Ole explains that the ample supply that we have seen in WTI recently has led to a widening of the spread to Brent. He says we’re seeing the situation being repeated in the Brent Crude market, which indicates the world market is well balanced in terms of oil supplies. Looking ahead, Ole thinks the spread could narrow even further because US refineries will come back from maintenance.

But it’s grains that has been one of the biggest stories in the commodity market this week, with corn down around 1.5 percent, and wheat down over 2 percent.

However, Ole explains that the upcoming USDA report will confirm the astonishing turnaround for US corn inventories; in just one season we have gone from the inventory levels being at a 17-year low, to a 9-year high.