GENERAL MARKET CONDITIONS

ARE HEDGE FUNDS MOVING AWAY FROM COMMODITIES

There was some news that “Hedge funds are exiting commodities following their recognition that the US Fed intends to fight inflation with rate hikes and that regulators intend to fight "speculative abuses" in various markets with limits.” I do not believe it. This is just some churning of short term portfolio away from commodities before the US presidential elections and nothing else. We all know that commodities price rise or fall have a lagging effect. The positive effects of the current fall in commodity prices will be reflected in October which is just before the US presidential elections. I believe that hedge funds have political patronage. If central banks and commodity exchange officials were to act they could have reacted much earlier as they advanced information of the things to come. Once we know who is the next US president commodities will re start the next phase of the bull run and possibly new highs will be created.

Monetary heads of all the countries will try their best to break the commodity bull run and they have been successful in the short term. In the long term it’s the supply side pressures which the central banks cannot control and hence they will be helpless in controlling prices from falling. All the central banks can do is to reduce the pace of rise of commodities but they cannot alter the rise.

35 YEAR HISTORICAL CHARTS PORTRAY THAT GOLD SHOULD RISE 15% FROM AUGUST LOWS AND IT REMAINS TO BE SEEN WHETHER HISTORY REPEATS ITSELF.

GOLD DEMAND

If the rise in any commodity gets supported by an equal rise in physical demand then the rise will be sustained but the pace of rise will be slow. This is happening in gold and silver. Physical prices of gold and silver bars are at a premium in India. Banks have run out of gold stocks. Wholesalers are fixing their today for delivery on Monday or Tuesday. Gold and silver wholesalers as well as jewelry manufactures have increased their inventory levels and are buying as much as they can as they prepare for the Indian festivals for the next three months. Physical demand for gold and silver will continue to rise. Demand for gold in India will fall below $790 only to reappear around $760.



NYMEX CRUDE OIL (1ST CONTRACT)

In the short term as long as crude oil holds $109 downside will be limited and crude will try for $122.20+. Crude oil has to fall below $109 for another round of selling to $98.40.


MCXARUN
9994500540