- Currencies & Commodities Commentary -

April 28, 2010 (FinancialWire) (Investrend Information Syndicate) (Via Brewer Futures Group) — Yesterday the ProShares Ultra Gold ETF (NYSE: UGL) closed up by $1.55 on volume of 381,200 shares to end the day at $50.05 per share, the SPDR Gold Trust (NYSE: GLD) closed up by $1.88 on volume of 25,031,000 shares to end the day at $114.63 per share, the Market Vectors Agribusiness ETF (NYSE: MOO) closed down by $1.48 on volume of 1,453,500 shares to end the day at $42.38 per share and the iPath Goldman Sachs Crude Oil ETF (NYSE: OIL) closed down by $0.66 on volume of 513,500 shares to end the day at $25.96 per share. FinancialWire(tm) contributor, Brewer Futures Group, provides some related perspective and insight regarding the outlook for the commodities markets:

Stock indices, gold and crude oil all opened lower yesterday due to lower demand for higher yielding assets. The weaker Euro and British Pound are helping to spread fear and uncertainty around the markets this morning.

The June E-mini S&P 500 opened lower yesterday after the previous day’s closing price reversal top was confirmed. The daily chart indicates that a break to 1198.25 to 1194.00 is likely over the near-term.

June Treasury Bonds opened higher yesterday due to increased demand for safety and lower yielding assets. Gains could be limited as traders may be a little reluctant to increase their long positions amid this week’s auction and subsequent increases in supply.

The stronger Dollar is pressuring June Gold and June Crude Oil. Both markets are also down because of the weaker Euro. Gold’s losses could be limited if speculators decide to buy the metal as a hedge against a collapse in the Euro.

Uncertainty over whether a Greece financial aid package would be worked out in the short-run and fear that sovereign debt problems are spreading across Europe to other countries is pressuring the Euro overnight.

The lack of clarity is helping to pressure the Euro. Investors were expecting to hear by now that the European Union and International Monetary Fund were on the same page with Greece and that a bailout plan was getting close to be hammered out. Instead uncertainty continues to linger and the Greek financial problems seem far from over.

One of the problems is investors want to know how the borrowing mechanism proposed by EU/IMF a couple of weeks ago works. It’s one thing to propose a bailout plan, but apparently another thing to actually know the details. It now appears that the original proposal was enacted to try to stem the decline in the Euro rather than fix what ails Greece.

Another issue plaguing a quick solution to the problem is Germany. Clearly Germany does not want to fund any plan to bailout Greece with the struggling nation’s promise to make even more austere budget cuts than previously agreed upon several week’s ago.

As long as the debate goes on, the Euro is expected to weaken. This is twice within the past month where good news triggered a short-covering rally only to be met by fresh shorting pressure. Overnight the spread between Greek Bonds and German Bunds neared 700 basis points. This indicates that fear and uncertainty is driving the markets and that capital market traders may be in charge of Greece’s fate rather than the EU and the IMF.

Monday night, additional information from Portugal showed that the cost of insuring its debt also widened. This is causing more uncertainty and leading to speculation that the Euro is on a path that could eventually destroy the structure of the main European currency.

Look for traders to keep the pressure on the June Euro over the near-term. Volatility will remain high as the Euro will be sensitive to various news stories breaking throughout the day.

After looking like it was going to emerge as the strongest currency yesterday, the June British Pound was trading as the weakest as of Monday night. Once again the combination of uncertain election news and weaker than expected economic data is helping to pressure the British Pound just a few days after the economy appeared to be getting back on track and one day after traders had swept aside political fears.

Traders are reacting negatively to weaker than expected U.K. Retail Sales Growth and mortgage approvals. April retail sales growth was reported at +13 but economists were looking for a +15. The number of mortgage approvals in March rose to 34,905 but lending only rose by 2.4 billion pounds. This was the smallest increase since July 2009 and indicated the housing market was still a drag on the economy.

In addition to the economic news, it was reported that another election poll shows that the election is too close to call and that it appears that there is still no clear leader. Without a majority leader in the polls investors are uncertain whether parliament will be able to agree on the austere measures needed to shore up the country’s budget.

The weaker Euro and British Pound are helping to drive down demand for higher risk assets. This is helping to put selling pressure on commodity-linked currencies such as the Canadian Dollar, Australian Dollar and New Zealand Dollar. Weaker global equity markets are helping to drive up interest in the lower-yielding Japanese Yen.

Source: Courtesy of Brewer Futures Group; For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Communications via resources@investrend.com with “Brewer” in the subject line.

Streaming Research for companies and funds mentioned in FinancialWire(tm) news is available via the Investrend Research Syndicate, courtesy of Stock Smart (at http://investrend.stocksmart.com/ss/html/hpcompany.html).

Brewer Futures Group advises that futures and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Futures Group, LLC, Brewer Investment Group, LLC, or their subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information provided in the above article is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Communications via resources@investrend.com with “Brewer” in the subject line.

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