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Traders ditch commodities as risks loom

By Michael Bellart  (Global Times)

08:16, May 14, 2012

Most global commodity prices steadied in the hours after the Chinese mainland markets closed Friday, yet it remains unclear whether the risk aversion behind last week's sell-off will continue to sway the market.

Crude oil, gold, cotton and copper futures steadied in the evening, while Nymex crude oil and Comex gold rose slightly in post-Asian trading, though the three-month copper contract on the London Metal Exchange (LME) did fall 0.67 percent before finishing the day at $8,000 per ton.

Still, the four contracts took losses for the week. Nymex crude for June delivery lost 2.4 percent last week; June Comex gold lost 3.72 percent; and LME copper fell 2.36 percent for the week.

Cotton was the hardest hit after traders and investors, rattled by US Department of Agriculture's monthly cotton report showing a supply glut, sold off their positions. The benchmark cotton contract on the US Intercontinental Exchange (ICE), for July delivery, collapsed 10.25 percent last week to settle at $0.7897 per pound.

For much of the commodities sphere, last week's sell-off went way beyond fundamentals as market participants across sectors abandoned the market as part of a broader flight from risk, analysts told the Global Times.

"The market is in risk aversion mode," said Zhang Bing, a rubber analyst with CITIC Newedge Futures.

Natural rubber futures on the Shanghai Futures Exchange (SHFE), for example, lost 5.09 percent last week to close at 25,540 yuan ($4,046.74) per ton. The fact that many commodities contracts tapered their losses in post-Asian trading indicates that the stage might be set for a rebound when the market's open this morning.

However, there is still weakness in the market in some spheres. For example, the benchmark soybean contract on the Chicago Board of Trade fell 2.03 percent after the mainland markets closed Friday, capping off a daily loss of 3.38 percent. And although cotton futures appear oversold, Reuters reported over the weekend that analysts said it would matter little in the short term to investors.


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