Commodities Remained Firm as Helped by QE3

By Roger Baettig | September 17 2012 4:15 AM

Commodities moved steadily in Asian session on Monday as investors are thrilled by the Fed's announcement of QE3. Both the size and the timing of the new quantitative easing program were impressive, raising confidence that the US recovery would be bolstered. Economic data was mixed on Friday but the market largely ignored it. This week, nine Fed presidents would make public speeches and we will get a better understanding of their thinking on their monetary stance and the economic outlook.

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Despite the lack of market attention, some US data reported last Friday was disappointing. US industrial production fell -1.2% m/m in August, compared with July's +0.6% rise and consensus of a +0.1% gain, Hurricane Isaac is estimated to have trimmed about -0.3% from growth last month. On the positive side, the University of Michigan Consumer Confidence index improved to 79.2 in September from 74.3 a month ago. The market had anticipated a modest drop to 74.

We have a light calendar today. The Eurozone trade surplus probably narrowed to 9.8B euro in July from 10.5B euro a month ago. In the US, the Empire State manufacturing index might have improvced to -2 in September from -5.85 in the prior month. For the coming week, the market focus would return to the Eurozone as the preliminary reading of manufacturing PMI for September would be released. The BOE and the RBA would publish minutes for the September but little surprise is expected

Commitments of Traders:

Speculators were mixed towards the energy complex in the week ended September 11. Net length for crude oil futures rose +10 073 contracts to 248 665 while that for gasoline added +1 543 contracts to 68 708. Net length for heating oil slipped -2 136 contracts to 12 025 and net short for natural gas futures added -13 322 contracts to 103 714.

With the exception of silver, speculators were bullish towards precious metals during the week. Net length for gold futures increased +11 552 contracts to 182 016 while that for silver dropped -948 contracts to 31 482. For PGMs, net length for platinum gained +3 269 contracts to 33 752 while that for palladium rose +291 contracts to 8 682.