Bloomberg News

Speculators Boost Bullish Bets to Seven-Week High: Commodities

November 15, 2011

(For more commodity columns, click CMMKT.)

Nov. 15 (Bloomberg) -- Speculators increased wagers on rising commodity prices to a seven-week high as signs of resilient U.S. growth boosted prospects for demand.

Money managers increased combined net-long positions across 18 U.S. futures and options by 5.3 percent to 840,972 contracts in the week ended Nov. 8, Commodity Futures Trading Commission data show. That’s the highest since Sept. 20. The Standard & Poor’s GSCI Index of 24 raw materials has jumped 12 percent since Sept. 30, rebounding from two straight quarters of losses.

U.S. consumer confidence topped forecasts this month, data showed on Nov. 11. Retail sales rose more than expected, the Commerce Department said today. The Standard & Poor’s 500 Index gained in five of the past six weeks. The outlook for commodity demand has recovered since September, when the GSCI tumbled 12 percent, the biggest monthly drop since November 2008, on concern that Europe’s debt crisis would send the global economy into another recession.

“We are finally beginning to see an improvement in sentiment,” John Stephenson, who helps manage $2.6 billion at First Asset Management Inc. in Toronto, said in a telephone interview. “Positive numbers out of the U.S. are helping people extend their long positions in the commodity markets. The fears are there, but they are not in the forefront.”

November Gains

While only 10 of the 24 commodities tracked by the GSCI rose in November, the energy-weighted index advanced 2 percent as crude oil jumped 5.1 percent. Gas oil, feeder cattle, heating oil, gold, coffee, Brent crude oil, cattle, lean hogs and wheat rose. Natural gas, nickel and cocoa posted the biggest losses.

The MSCI All-Country World Index of equities has dropped 2.4 percent this month. Treasuries rose 0.7 percent, on a total return basis, Bank of America Corp. indexes show.

About $7.8 trillion has been wiped off the value of global equity markets since May 1 as markets were roiled by concern that Greece’s debt crisis would spread and cripple global growth. The GSCI Index has tumbled 13 percent since reaching a 32-month high in April.

George Papandreou resigned last week as prime minister of Greece to make way for a coalition led by Lucas Papademos. Italy’s borrowing costs climbed to a euro-era record yesterday after the resignation of Silvio Berlusconi as prime minister last weekend.

‘Short-Term Optimism’

“I would be surprised if there are any significant changes in the market place that look beyond the problems” in Europe, said Troy Buckner, the chief executive officer at Morristown, New Jersey-based Nuwave Investment Management LLC, which manages $1.1 billion of assets. “We can see short-term optimism, but the fundamental problems remain.”

Goldman Sachs Group Inc. lowered its forecast for commodity gains in the next year to 15 percent from 20 percent after correctly predicting the climb in prices since the beginning of last month. The New-York based bank said copper will gain 22 percent, and raised its estimates for oil, gasoline, gold and live cattle.

The GSCI commodity gauge has rebounded 15 percent since touching a 10-month low on Oct. 4 on signs that supplies of metals, energy and agricultural products are still falling short of demand. Eighteen of 24 commodities tracked by the index have gained since the low, led by a 30 percent jump in crude oil. Heating oil has climbed 16 percent, and silver is up 14 percent. The gauge rose 0.2 percent at 9:22 a.m. in New York.

$2.16 Billion

Investors put $2.16 billion into commodity funds in the week ended Nov. 9, according to data from EPFR Global, which tracks investment flows. Gold and precious-metals inflows contributed $1.83 billion, said Cameron Brandt, the director of research at the Cambridge, Massachusetts-based research company.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 64.2 this month, the highest since June, data showed on Nov. 11. The median estimate of economists surveyed by Bloomberg News called for a reading of 61.5. Federal Reserve Bank of Dallas President Richard Fisher said yesterday the U.S. economy is “poised for growth” going into next year.

A Commerce Department report today showed that U.S. retail sales climbed 0.5 percent last month, topping economist estimates for a gain of 0.3 percent. Purchases of electronics jumped by the most in two years.

Crude Bets

Bets on higher crude prices climbed 7.2 percent to 203,965 contracts, the highest since late May, the CFTC data show. Net- long positions in gold surged 13 percent, the most since mid- July. Speculators boosted their corn wagers by 12 percent, the third straight gain, and lifted those on heating oil by 12 percent.

Global oil consumption will increase by 1.3 million barrels a day, or 1.5 percent, next year to 90.5 million a day, the Paris-based International Energy Agency said on Nov. 10 in its monthly market report. U.S. crude-oil inventories have dropped 8.7 percent since the end of May, according to the Energy Department.

Corn Crop

On Nov. 10, Goldman raised its corn-price forecast after the U.S. said the domestic crop will be smaller than previously estimated. Farmers will harvest 12.31 billion bushels, less than the 12.433 billion forecast in October, the U.S. Department of Agriculture said on Nov. 9. Global demand of 34.1 billion bushels will exceed production of 33.8 billion bushels, USDA data show.

Demand for commodities may rise as China eases its monetary policy to spur growth, said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $360 billion of assets.

China’s lending jumped by more than analysts forecast in October, signaling that the government may be loosening credit quotas to support growth. The country is the world’s biggest consumer of commodities from copper to soybeans.

A measure of net-positions in 11 U.S. farm goods climbed 4.9 percent to 491,347 contracts, according to an index compiled by Bloomberg from CFTC data. It was the third gain in four weeks.

“People are back in commodities as they realize that not only has the U.S. avoided a recession, but it’s growing,” Wells Capital’s Paulsen said. “A realization that the emerging markets have indeed orchestrated a soft landing and are pushing back again will put the wind behind commodities again.”

--Editors: Millie Munshi, Steve Stroth

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net;

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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