OUTSIDE MARKET DEVELOPMENTS: While the Dollar enters the US session today close to the prior session’s lows, favorable global equity market action and the proximity to year end seems to have temporarily improved macro economic sentiment somewhat and that in turn seems to have initially undermined gold and silver prices. It also seems as if financial stability promises from the Chinese central bank overnight have also added to the slightly up beat macro economic view that was seen in the prior trading session and that might also be seen as a slightly negative to gold and silver prices today. It would also seem like weaker physical commodity prices overnight is giving the bear camp in the metals an additional argument early today, but one has to wonder if a noted rally attempt in equities later today would provide some lift to metals prices, especially since the Chinese Central Bank dialogue overnight inspired optimism toward a host of raw materials companies. The US economic report slate today is pretty active, considering the proximity to a holiday closure on Thursday and that might serve to keep the metals trade active throughout the session today. In fact, some expectations are calling for a slight decline in initial claims figures this morning and that could add to the early positive bias being seen in the equity markets.
GOLD MARKET FUNDAMENTALS: The Dollar is showing some weaker action early but one gets the sense that macro economic concerns over the last 24 hours have been tamped down somewhat and that a strong finish by US equities today, could temporarily reduce interest in flight to quality alternatives. With another huge weekly decline in Russian gold and currencies reserves noted overnight it is clear that financial turmoil in the Russian economy remains high and one might also assume that the Russians are in a position to be selling some gold reserves. The gold trade is also paying attention to ongoing weakness in oil prices this morning and therefore it could take a slide below 81.39 in the March Dollar Index for the gold bulls to begin to throw off the early negatives facing the market this morning. However, despite the prospect of economic optimism today, the overall fear of further slowing and lingering fears of the next financial crisis surfacing at some point in early 2009 remains in play and that should serve to keep a number of players interested in the gold market as an alternative investment. In fact, the gold market has already noted the ongoing flow of investment money toward gold and gold based derivatives earlier this week, and that pattern doesn’t look to be derailed by a couple days of gains in equity prices.
TODAY’S GUIDANCE IN GOLD: Minor downside action is possible early today, especially if the US equity market manages to discount the fears of slowing today. In fact, in the event that February gold fails to hold above $864.7 that could set the stage for a slide down to even lower support of $860. While it is possible that February gold could even fall to the $850 level today that type of washout might require a very strong upward pulse in the equity markets today.
SILVER MARKET FUNDAMENTALS: This morning the silver market isn’t showing the type of positive divergence with gold prices as was seen in the prior trading session. In fact, with another noted rise in silver exchange stocks overnight and some early weakness in energy prices this morning, the silver market does seem to be facing a slight negative outside market environment this morning. However, it should be noted that copper prices started out slightly higher today and it is possible that silver prices might attempt to hold together better than gold prices in the face of favorable US equity market action today. In other words, silver’s physical or classic commodity market standing might provide some support today, if the markets somehow manage to put on a positive macro economic face for the last trading session of the year. However, weakness in gold prices and weakness in grain prices early in the trading session are certainly an issue that the bull camp in silver will have to deal with today.
TODAY’S GUIDANCE IN SILVER: We can’t argue against minor downside action in silver in the face of what appears to be early bullish interest toward US equities. However, silver wasn’t as overbought in the latest COT report as gold and therefore the downside action in silver today might not be as severe in the event that hard assets lose to paper assets today.
PLATINUM: We suspect that platinum prices will be able to shake off a slightly negative early bias today, especially if the US stock market manages a distinct upward pulse. In fact, given the prospect of temporary optimism in the wake of potentially favorable GMAC news of the last 24 hours, we could see some bargain hunting buyers steeping forward in platinum and attempting to push prices up. However, with January platinum prices sitting at least $100 an ounce above the early December consolidation lows, fresh longs are assuming significant risk for what seems to be limited reward.
Hog Market Commentary – 2008.12.31
by Terry Roggensack on December 31, 2008
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The USDA report, released after the close held a slightly bullish tilt to expectations but traders were hoping for a bullish surprise and the report showed a few more market-ready hogs than expected. As a result, the new buying might come in to the April and June contracts while long liquidation could pressure the February. All Hogs and Pigs as of December 1st come in at 97.8% of a year ago as compared with trade estimates near 99% of last year and some estimates as high as 102%. The total was 6.7% above the 2006 level. Kept for breeding supply was 97.6% as compared with pre-report trade estimates near 96.5% of last year. Kept for market animals came in at 97.9% of last year as compared with the trade estimates near 99.25% of last year. The weight breakdown showed heavier weight animals (180 pounds and above) at 99.6% of last year and these animals are already mostly through the pipeline. For the next several weeks, the market will go through the 120-179 pound category which showed a supply which is 100.5% over last year which was about 2% above trade expectations. As a result, the report is more positive to the spring and summer month contracts where the weight breakdown shows a much smaller supply. The “under 60 pound” category came in at 94.5% of last year vs. trade estimates near 96%. The market pushed moderately higher on the session yesterday with short-covering ahead of the report helping to support. The market chopped around unchanged early in the day but a lack of new selling interest and ideas that the supply of all meats will decline in the weeks and months ahead helped to support. Rumors that the US and Russia may be coming to an agreement to see increased Russian imports of US pork in 2009 helped to provide some support as well. Cash hogs were steady as compared with a steady to lower call and this may have helped support as many traders see ham prices recovering quickly as more plants are approved for Mexico trade. Of the 30 plants suspended, 20 were brought back on line. The CME Lean Hog Index as of December 26 came in at 52.50, down 77 cents from the previous session and down from 54.62 the week before. The estimated hogs slaughter came in at 435,000 head yesterday. This brings the total for the week so far to 866,000 head, down from 869,000 last week at this time but up from 375,000 a year ago. Pork cut out values, released after the close yesterday, came in at $54.49, down 26 cents from Monday and down from $57.92 the previous week.
TODAY’S GUIDANCE: Weakness in pork cut-out values overnight and a slightly larger upfront supply could keep the short-term trend down.