The main causes for the increase in commodity prices are continued sabre rattling by the U.S. and Israel against Iran, the inability for the European Union to resolve its sovereign debt problems, and the continuing increase in the U.S. debt.
The increase in oil and gas prices is due to the fear that there will be a supply disruption in the oil markets if the U.S. or Israel attacks Iran. Iran is the second largest producer of crude oil in the world next to Saudi Arabia. The U.S. imposed sanctions to cut off Iran's access to U.S. banks which are essential to the international buying and selling of Iran's oil. The increase in precious metals such as gold and silver is due to a combination of flight to safety in the event of another war in the middle east along with increased sovereign debt in the U.S. and Europe which makes their currencies devalue against precious metals.
Bullion desk prices broke the upper range as concerns hovered that a second bailout for Greece will not be enough to end the European debt crisis which was then supported by Fitch downgrade of Greece to C. Gold rose to trade above $1770 on the back of weaker Manufacturing Details of Euro-zone as well as China. Holdings in Deutsche Bank’s physical gold exchange-traded funds increased 14,277 ounces to 1,078,656 ounces as of Feb. 21. For the day coming by we expect bullion desk to trade higher on the back of high heaven demand concerning European crisis.
The base metals complex traded little down in the early trading session paring previous gains on economic growth concerns on Greece ratings cut and poor manufacturing data from China. LME copper traded done near $8419 while LME lead declined almost 1% to $2129. We expect base metals prices to trade in range for the day on gloomy economic outlook eyeing US job market report in the evening session.
Crude Oil futures traded up above $105 witnessing range bound trading session on Iran tensions after Iran restrict the UN watch dog - IAEA inspector from visiting key military base. The Greece rating down limited upside in oil prices with negative equity indices. We expect oil prices to trade sideways to up with concerns of possible military action from Israel and US on Iran and bearish inventory data expectation in the evening session. NYMEX crude oil has important resistance at $106.30 and support at $103.40.
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