Commodities Prices Hold Firm Despite a Strengthening Dollar

Commodities ended little changed in recent trading despite a resurgent dollar that reflected investor fears about Europe’s debt crisis.

Strong US economic data, including an upbeat jobs report made investors more optimistic about the world’s largest economy. Looking at the GFT Markets charts, gold rose 3 percent in recent trading. Grains and other agricultural markets ended mostly lower after a week of wild swings. The Eurozone debt crisis, now running into its third year, began to bog down markets again.

Gold trading was choppy as contracts for difference investors digested a report of better US job growth and the unemployment rate near a three-year low. Having said that, the metal still notched its biggest weekly gain in five weeks after it broke ranks with a slumping euro.

Bullion has now more than recouped the losses that briefly sent it into bear market territory. Trading volume was decent after data showed US nonfarm payrolls increased 200,000 in December and the unemployment rate dropped to a near three-year low of 8.5 percent, offering the strongest evidence yet the economic recovery was gaining steam.

In online CFD trading natural gas prices also rose 3 percent as some long-term weather forecasts called for more winter-like weather after a very mild start to the heating season. Prices had been knocked down on concerns over bloated inventories and mild winter weather.

Recent gas storage data from the US Energy Information Administration showed a weekly withdrawal of 76 billion cubic feet versus poll expectations for an 82 bcf draw, putting total domestic inventories at 3.472 trillion cubic feet.

Most traders said the draw was bearish, noting it was also well below the 135 bcf draw for the same week in 2010, and the five-year average drop for that week of 106 bcf. The draw again widened the inventory surplus relative to last year to more than 11 percent, and increased the excess to the five-year average to more than 15 percent. Early withdrawal estimates for this week’s EIA report range from 80 bcf to 107 bcf versus a year-ago draw of 138 bcf.

Contracts for difference (CFD) trading is a leveraged form of investment, it involves a high level of risk to your capital and can result in you losing more than your initial stake. It might not be appropriate for your investment requirements. Before you trade, make sure you fully appreciate all the risks. Only trade CFDs with funds that you can afford to lose. Where necessary obtain independent financial advice.

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