There continues to be both strong short covering and fresh buying occurring across the broad commodity sector this AM. The reason? Stronger than expected data out of China.
Last week it was data revealing a surge in both imports and exports. Today it was the larger than expected foreign direct investment numbers.
This is the reason that silver continues to outperform gold to the upside for now. It is also the reason that the overall commodity sector continues to march higher. Shorts are getting squeezed out across the board.
Crude oil is now trading above $101/barrel, the highest level since October 2013. Gasoline is closing in on its best level since late December. So much for the relief we were enjoying at the gas pump. That went back up in smoke. I always have mixed views on surging energy prices because while they tend to support the "buy commodity" theme, they also act as a drag on economic growth especially in today's environment in which the US consumer is so cash-strapped and with such stagnant wages.
Soybeans continue their charge higher with wheat and even corn moving up. Cotton prices are firm and coffee is flying higher while even the laggard sugar is higher today.
In short it is very difficult, if not downright impossible, to find any commodity market in the red today. That is what China does when it is in the news in any sort of positive way. Take a look at the "China Effect" on the chart below.
Thus far the fallout from the emerging markets issues has been superceded by this upbeat news out of China; however, China has its own set of issues so one has to carefully monitor the data coming out of that nation.
It will be interesting to see how many of these individual commodity markets settle for the day. As can be expected in seeing this sort of thing, the US Dollar just cannot seem to find a friend just yet. It is flirting dangerously with some strong chart support just below the worst level of the day. It is either do or die time for the greenback or it risks falling all the way to the 79 level basis the USDX.
Thus far the gold shares are lagging. Perhaps they will catch a late bid.
Gold ran into a bout of selling last evening as it traded near $1330. The failed attempt to charge higher through resistance brought about a round of profit taking. The dip lower in price however was bought ( it seemed to coincide with the China news however).
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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