21 Nov 2013
Commodity outlook: Pressure from Fed tapering prospects
Commodities remain under pressure on the prospect of an early tapering of the Fed’s USD85bn-a-month asset purchase programme. In the “will they, won’t they?” of Fed monetary policy second guessing, minutes released yesterday from the Federal Open Market Committee’s October meeting signaled that they would be prepared to taper asset purchases “in coming months” if the economy improves as projected.
Gold prices plummeted 2.7 percent yesterday to a USD1,241.13 low and remain under pressure today, down 0.9 percent on the opening to USD1,246.20.
Dollar-denominated commodities across the board came under pressure. WTI slid for a second straight day on the prospect of reduced demand from the world’s largest oil consumer should the Fed remove some support from the economy.
January WTI contracts are down 0.11 percent to USD93.75/barrel. European Brent contracts have been more resilient, down 0.02 percent to USD108.04/barrel.
2014 slowdown
Yesterday Goldman Sachs released a report that gold, iron ore, soybeans and copper will probably drop at least 15 percent next year, despite forecasted improvement in the US economy.
Iron ore will come under pressure next year as a result of a global seaborne iron ore surplus, according to the report.
The last two days of price action in the commodity markets are also a harbinger of what is to come when the Fed finally moves to taper its asset purchases, putting commodity currencies under pressure on reduced demand.
Gold prices plummeted 2.7 percent yesterday to a USD1,241.13 low and remain under pressure today, down 0.9 percent on the opening to USD1,246.20.
Dollar-denominated commodities across the board came under pressure. WTI slid for a second straight day on the prospect of reduced demand from the world’s largest oil consumer should the Fed remove some support from the economy.
January WTI contracts are down 0.11 percent to USD93.75/barrel. European Brent contracts have been more resilient, down 0.02 percent to USD108.04/barrel.
2014 slowdown
Yesterday Goldman Sachs released a report that gold, iron ore, soybeans and copper will probably drop at least 15 percent next year, despite forecasted improvement in the US economy.
Iron ore will come under pressure next year as a result of a global seaborne iron ore surplus, according to the report.
The last two days of price action in the commodity markets are also a harbinger of what is to come when the Fed finally moves to taper its asset purchases, putting commodity currencies under pressure on reduced demand.