Commodities Bulls Going Long

Hedge funds increased bets on rising commodity prices to the highest in 2 months, and the rally in raw materials accelerated as the US Federal Reserve pledged to keep borrowing costs low for at least 3 more years.

The CFTC reported that money managers raised combined Bullish positions across 18 US futures and options by 13% to 742,902 contracts in the week ended 24 January.

The net-Long position in Copper jumped 53% to the highest since August and in Silver by 22% to the most since September. Speculators also expanded Bull bets in Sugar, Soybean, Cotton, Gold, Gasoline and Crude Oil.

US Fed policy makers said on 25 January they will keep their target interest rate for overnight loans between banks near Zero at least until late Y 2014 and did not rule out buying more bonds.

The Fed 1st pushed rates to a record low in December 2008 and has since purchased US$2.3-T of debt in 2 rounds of quantitative easing (QE) that ended in June 2011.

During that period, commodities rose more than 80%. The Standard & Poor's GSCI Spot Index of 24 raw materials rose 2.2% last week, after a 0.1% gainer a week prior, as the USD depreciated to a 7-week low.

Every time the Fed sends the signal to the markets that there is going to be a continued easy monetary stance we see more interest in real assets, everything denominated in USDs goes up in price because the USD comes down. Stay tuned...

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.