Commodities rallied as driven by strong US economic data and escalated tensions between Iran and the West. The front-month contract for WTI crude oil jumped to 103.16, the highest level since May 2011, before settling at 102.96, up +4.18%. The equivalent Brent crude contract also soared +4.42% to end the day a 112.13. Gold rose further as the US dollar weakened and geopolitical tensions intensified. The benchmark Comex contract climbed to a 4-day high of 1608.7 before closing at 1600.5, up +2.15%.
After receiving stronger-than-expected manufacturing data from Asian and European countries, the US ISM manufacturing data also beat consensus and rose to 53.9 in December, up from +52.7% in November. Construction spending jumped +1.2% m/m in November, up from +0.8% a month ago. The market had anticipated a mild gain of +0.5%. In the FOMC minutes for the December meeting, policymakers decided to focus on improving transparency in this year. Members agreed to include their 'projections of appropriate monetary policy' into the Summary of Economic Projections (SEP) beginning in January. The SEP will also unveil 'participants' current projections of the likely timing of the first increase in the target rate' given their projections of future economic conditions. Moreover, there will be 'qualitative information regarding participants' expectations for the Federal Reserve's balance sheet' and introduction of a more formal inflation-targeting framework.
As the US and its allies progressed to sanction Iran in response to its development of nuclear weapon program, Iran's Deputy Navy Commander Rear Admiral Mahmoud Mousavi said that any effort to harm the nation's interests will lead to 'reciprocal measures'. The market viewed the threat from Iran seriously and worried that any retaliation moves would affect oil supply.
Commitments of Traders
With the exception of natural gas, speculators were bullish towards the energy complex in the week ended December 27. Net length for crude oil futures increased +6 546 contracts to 144 588.. Net length for heating oil rose +3 616 contracts to 11 083 while that for gasoline rose +6 550 contracts to 54 886. Net short for natural gas futures added +3 210 contracts to 160 591.
With the exception of palladium, speculators were bearish on precious metals. Net length for gold futures declined -3148 contracts to 130 788 while that for silver slipped -573 contracts to 6 855. For PGMs, net length for platinum slipped -562 contracts to 18 559 while that for palladium increased +94 contracts to 5 910.