Article / 25 February 2013 at 11:18 GMT

Look out for sugar and coffee as negative momentum takes hold

Head of Commodity Strategy / Saxo Bank
Denmark

Our momentum indicator on major commodities has now almost completely turned negative across the different sectors, with Brent crude oil turning on Friday following the sell-off earlier in the week. Sugar has seen the longest period of negative momentum without actually showing much of a return from a seller's perspective. Money managers have been busy selling both sugar and coffee, with the latest data from the CFTC showing that the speculative net-short positions held in both commodities are at or near record highs. Any change in the negative perception of these two could trigger a major round of short covering, thereby helping to assist a move higher.

Gold investors, both in futures and ETP's, stepped up their selling last week when a technical sell signal and other non-supportive news eroded sentiment further. The much reduced holdings, especially in futures and the fact that the gross-short is now at its highest level since 1999, when both the BoE and SNB were busy selling out of their gold reserves, has the potential of seeing support return. A dovish Ben Bernanke at this week's testimony before Congress and the Senate may help sentiment, with resistance currently found at 1,605 USD/oz and 1,625 USD/oz.

 

Commodity momentum

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