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The technicals are also turning: That might provide a fresh source of excitement and buying interest. Still, there are reasons to argue that the shift lower is mostly complete. Gold and silver price has a particularly strong correlation with real rates since the metals provide no yield, and hence demand is inversely related to the opportunity cost of speculation. An environment in which global bond yields are rising in the absence of significant inflationary pressures is about as bad as it gets for speculative precious metals, so the move makes sense.
However, if the rise in global yields persists, then severe spillover effects in other asset markets could prompt a bid for precious metal havens again. So we are approaching the point where both higher yields and lower yields have the potential to boost the asset class.
Technicals also look potentially buoyant. In euro terms, silver is looking stretched to the downside based on its relative strength index, a momentum measure.
Another thing — Monday is the first day of silver and gold futures trading on the LME. There are clear dangers involved when trying to catch a falling silver knife, but a risk-reward analysis makes an attempt appealing. The futures price then recovered nearly all of its losses in the subsequent minute period. During this time when the COMEX silver price crashed, there was nothing fundamentally happening in the wider financial markets, or indeed in the physical silver market, to justify these price gyrations in COMEX silver futures prices.
During this one minute period between The COMEX SI silver futures contract, which is a deliverable contract but which in practice is rarely delivered; is a futures contract for troy ounces of silver. Overall within these 4 minutes, more than 8, September silver contracts were traded. Following this 1 minute flash crash, in the subsequent minute between This rebound reflected in the below chart which also shows the opening and closing prices of each minute period. The price continue to rebound between Possible causes could include market illiquidity, deliberate manipulation, a trading error or errors, or algorithmic trading programs triggering stop losses or inducing abnormal trading patterns.
OPEC is expected to extend production cuts when it meets May Goldman reiterated its bullish call for an imminent supply deficit. The market technicals appear healthy and fresh for a sustained bounce. But at some point the much bigger picture will dominate again and that entails a far more negative skew on the situation. Baker Hughes rig count has climbed for the past 16 weeks. They are still above any level seen before this year. The important backdrop is that extraction from shale continues to become cheaper and more efficient all the time, lowering the price point above which production will rapidly increase to flood the market with supply.
All this boils down to a long-term, structurally bearish story. Rallies can last for weeks, or even months. The decisive factor, if only for the time being, technical positioning, as algos continue to enjoy stopping out whichever side is positioned more heavily in the oil price debate. As pessimism sweeps over the oil market, a few prominent voices are unbowed, arguing that the market is well on its way towards balance.
He pointed to the futures market, where the curve could be headed into backwardation — a situation in which near-term oil futures trade at a premium to contracts further out. That structure points to concerns about a deficit in the short run, which is why front month contracts would trade at a higher price than deliveries six or twelve months away. But the backwardation is also a symptom of fears over long-term oil prices.
Goldman Sachs has consistently argued that crude prices could remain relatively low for years to come as the cost of production has shifted lower. So, lower long-term prices have pushed the back end of the futures curve lower, with near-term prices trading higher. There is a feedback effect from the market shifting into backwardation. Without industry-wide hedging, the ability to grow production is diminished. Putting some of the jargon aside, Goldman is simply arguing that the oil market will be much tighter this year than most people seem to think.
The investment bank forecasts returns on commodity prices on the order of That prediction is based not just on the idiosyncrasies of paper trading, but ongoing improvements in the physical market.
For example, Goldman predicts a rather modest inventory build of just 6 million barrels crude oil and refined products across the U. Goldman also cautions everyone not to read too much into the exceptionally high inventory level in the U.