“Turn around” or “Dive”?----- Observation on Three Consecutive Months of Goods
Author: May 25, 2011 09:00
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Over the last three months, commodity markets experienced a storm like baptism, such as basic metal, precious metal, energy, soft commodities and other leading products all devaluated greatly. Cupro price in London reduced 12% in compare with that of February and cotton price jumped over 30%, silver, crude oil and other commodity slumped 30% and 20%.
Now we can see a common phenomenon---some people started to laugh at Rogers. His well known long term bulk market in commodity theory is said to be bluff and the investment seems to have become a joke. Also we can find that the voice of dollar depreciation gone in a sudden and the voice of dollar appreciation becomes popular, all commodities will bear pressure, just as what you have seen in the past three months, the bulk market has ended.
In fact, before the commodity price slump in February, the market has already gone through a growth of two years’ long. With the boost of printing money to rescue the market of many countries, the economic recovery and abundant liquidity making cupro one of the longest bulk market products. International cupro price started a V shaped inversion since 2008; the total increase amount has been over 260% till February this year. In the second half of 2010, agriculture center shift up, ever since, corn, wheat, sugar and other commodity price doubled one by one. Cotton price even quadrupled, and silver price increased 150% in the first half of last year, such as cupro, natural rubber, cotton and other commodities has surpassed the level of 2008, reached new highs.
But this argument is just like the sand that rubbed in the eye. People become unaccustomed to the short term adjustment. However, commodity price up is a long term while the call back is always seems in a sudden, every time when price slumps, it brought about criticism. In the first half of 2010, European debt crisis led to U.S. dollars went strong. International cupro price slumped 25% over the 6 months. But after the incidence, we find European debt problem is only a episode in the process of continuing quantitative easing policy of the Federal government. London cupro soared 65% in the following 8 months, agricultural products and energy price went high follow up.
November, last year, because China raised the deposit reserve ratio, the international commodity liquidity tightened up. American quotation for cotton, sugar price lowered down 20%. But the following months, people find China’s deposit reserve ration increase; interest increase and even in other countries has frequently carried out, adding with the American QE2 policy, commodity price increased in policy numbness. The previous lowest cotton price rebound over 200cents/p soon, metal price go up directly over 10 thousand dollars, and the crude oil price mount up over 110 dollars.
Just like the situation of the previous extensive readjustment cases. In this readjustment, people that calls for price down have many reasons, firstly, the Japanese earthquake may beaten commodity demand, then the non-US economies interest rates surge, and then the death news of Bin Laden, which make the geopolitical influence decline, and then it was the European debt problem, U.S. dollars went strong again, and lastly, even the commodity fund manager’s take profit can be seen as an excuse, though, we can never see the exact number of fund positions.
Relative to those virtual price down factors, we should not ignore the fact that although some industry use commodity slumped, those relatively rigid demand commodities price keeps firm. American quotation for cotton price even hit the new peak of 780cents in the mid term of April. Even though metal, crude oil, cotton, silver and some other commodities price slumped, their reduce amount is far less than the increase amount over the past two years and the general increased trend has not changed.
Since the beginning of the year, there is also the possibility of price increase under the general price go down phenomenon. Reconstruction will be carried out after any kind of disaster, whether global interest raise means the end of price down ward; the death of Bin·Laden also does not mean the end of anti-terrorist war; the prominent European debt does not means U.S. dollars will go strong again; the unsettled commodity fund may kick the bottom again after the price readjustment. Since 2009, commodity price has accustomed to go up slightly, slump down quickly. Whether the readjustment this time will be the same case as the past, which seems turn around, but indeed it was a dive?
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Editor: Candy From: 168Tex.com
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