Commodities edge high in Asia session Monday as weakness in dollar boosted demand. WTI crude oil price climbs above 79 but remains below 80. Gold price remains firm after Friday's rally. Decline in the dollar has recently been driven by disappointing economic data which spurred worries over economic slowdown. Less-than-expected growth in 2Q10 GDP indicates that the recession is more severe than previously feared.
There have been concerns over a slowdown in China and the PMI index released today further evidence this. The PMI index compiled by HSBC shows that the country's manufacturing activities contracted for the first time in 16 month in July. The reading fell to 49.4 from 50.4 in June. Similar survey compiled by the Chinese government suggested manufacturing activities slipped to 51.2, the lowest level in 17 months, in July. China is the world's biggest growth driver and one of the largest consumers in commodities. Signs of moderation of growth should limit commodities upside.
We will have a heavy calendar this week. While the US employment report is the focus, the ISM data and a speech on the economy from Fed Chairman Bernanke will also be indicative of economic outlook. Investors are probably interested in to see to what extent the pending home sales recovers from the 30% plunge in May.
3 central banks will be meeting for rate decisions. The RBA is anticipated to keep the cash rate unchanged at 4.5%. Australia's retail sales and building approvals for June will instead be the focus. Both ECB and BOE will also leave the policy rates unchanged at 1% and 0.5% respectively.
Commitments of Traders:
With the exception of heating oil, speculators turned more bullish towards the energy complex in the week ended July 27. Net length for crude oil increased +8.17K to 443.13K while that god gasoline gained +7.03K to 48.25K, the highest level since mid-May. Net length for heating oil, however, slipped -2.30K to 13.11K. Net shorts for natural gas dropped -1.88K to 154.10K.
In the precious metal complex, net length for gold rose for the first time in 4 month despite price slump. We believe recent selloff due to improvement in market sentiment was driven by long liquidation and lack of capital inflows to ETFs. Net length for silver declined for a second consecutive month. Net length for PGMs soared in tandem with prices. Safety problems and threat of strikes in South African mines spurred worries over supply disruption and lifted prices. Net length for platinum and palladium surged +2.06K and +1.11K respectively to the highest levels in 5 weeks.