Written by Sumit Roy  |

June 07, 2011

Commodities Steady Ahead Of Ben Bernanke Speech, Meat Prices Hit Record In May

Details

All eyes will be on Ben Bernanke today, as markets look for signals from the Fed chairman.

IN TODAY'S HEADLINES ...

• Commodities are steady this morning, thanks to improving sentiment in global financial markets. Bargain hunters lifted stock prices overnight in Asia and Europe, as some speculated that the recent U.S. slowdown fears were already priced into shares. Strong economic data helped too; eurozone retail sales for April rose by 0.9 percent month-over-month in April, well ahead of the 0.3 percent consensus estimate. German factory orders advanced 2.8 percent, besting the 2 percent expectation.
  
  Meanwhile, the U.S. dollar hit yet another one-month low on the view that the Fed will now keep monetary policy looser for longer in light of recent weak U.S. data. Speaking of the Fed, Chairman Ben Bernanke is set to speak about the U.S. economic outlook, in Atlanta at 3:45 p.m. EDT—an event that is certain to be closely watched by traders and investors.
  Dollar index at 1-month low as China warns on US assets
  
  
• Weakness in the greenback is helping to keep gold strong near the $1,550/oz level, while silver rises back above $37/oz. The gold/silver ratio stands at 41.6. "All the market participants we met with in China last week expect a slowdown in physical demand before buying picks up again in September," said one analyst. But while there may be summer head winds, "this would be viewed by most as a short-term correction within a bullish market. It's very difficult to leave Asia, and in particular China, without feeling bullish about gold."
  Gold Advances on Slowing US Economy, Weakening Dollar Increasing Demand

• Crude oil is flat, with Brent near $114.50 and WTI near $99 ahead of tomorrow's OPEC meeting. Analysts seem split over whether the cartel will raise its production quotas from their extremely depressed levels.
  
  On the one hand, quotas are well below actual production levels, thus an increase would likely only be symbolic and a practical adjustment to match reality. On the other hand, amid the recent U.S. slowdown worries, some in the group—especially the hawks Iran and Venezuela—do not want to take any action that could trigger a sell-off in prices. But again, any increase would be largely symbolic; thus it's unlikely that such a move would lead to a lasting correction by itself.
  
  Markets will be more concerned with actual production levels. In that regard, sources indicate that Saudi Arabia is already starting to unilaterally increase its output to meet strong emerging market demand.
  Saudis raise oil production to curb prices

• Global meat prices hit a record high in May, according to the latest survey by the United Nations' Food and Agriculture Organization. The index of overall food prices fell slightly to 232.4 from 234.8 in April, but remains uncomfortably close to February's 237.7 all-time high. "The high-price situation is not something that's just going to vanish over one season," said an economist at the organization. "The fundamentals are still what they are, a very tight situation for almost all commodities."
  Food Prices Stay Near Record as Meat Costs Rise

• Extremely tepid price action in the copper market continues on Tuesday, as the metal sits just above $9,100/mt once again. "Metals markets are treading water until the effects of China's tightening measures become clearer and U.S. and European macro figures brighter," said one analyst.
  Copper steady on recovery prospects, dollar

What to Watch For:

3:45 p.m. EDT: Fed Chairman Ben Bernanke speaks about Outlook for the U.S. Economy in Atlanta

4:30 p.m. EDT: API Weekly Statistical Bulletin