Traders are no more interested in holding positions

By Renisha Chainani

May month was divided into two half- where in first half, there was scenario of “SELL in May and Go away” and then in later half “Goldman Sachs spoke and Market listened”. The month of May began with investors heading for the exit as panic selling was seen across the whole sector. The combination of near record short dollar and long commodity positions had become so stretched that only a small spark was enough to light the fire.

In this case the spark came in the shape of silver. On the very first day of May, CME increased margins in Silver by 13% and bubbling market crashed 36% from $50 to $32 in just four trading sessions and the white metal took all commodities in selling mode. Investors remained sidelined in commodity markets after being rattled by a sharp price correction. Steep declines in silver futures quickly spread to other commodity markets, knocking gold off $1,500, crude oil below $100 and forcing copper below $4 a pound

Crude Oil extended selloff due to demand downgrades. Both the DOE/EIA and the IEA revised lower their forecasts on global oil demand this year. The IEA said that persistent high prices and weaker IMF GDP projections for advanced economies are dampening demand.

Then there were fresh concerns on the European sovereign debt situation as S&P downgraded outlook on Italy on weekend while Fitch warned that it may downgrade Belgium's AA+ credit rating. The Greek government, which finds trapped in a "refinancing hole", where the only choice left is to continuously endorse in EU/IMF demands to not default, had to step up the austerity measures again last Monday, announcing another package of public spending and the state sale assets. The Euro took center stage to make new lows against major rival.

Meanwhile, Energy and Metals gained support as Goldman Sachs and Morgan Stanley both raised oil price forecasts on prolonged losses of Libyan production due to conflicts in the region. Goldman Sachs noted that inventories and OPEC spare capacity will become "effectively exhausted" in a matter of time. All Commodities started recovering from its lows after Goldman Sachs called copper, oil and base metals to move higher. Many commodities gained, but the metals and energies are taking the lead and look like they have made the strongest turn higher on the charts.

Goldman Sachs identified copper as "an attractive opportunity" at current prices, advising clients to purchase the metal in a research note. The bullish call helped lifted prices, and continued to draw investment interest to the red metal. Copper also received a boost from worker protests Wednesday at Chile's El Teniente mine, the world's largest underground copper mine. Local media reported that about 1,000 contract workers protested working conditions and wages at the mine, owned by state-controlled Corporacion Nacional del Cobre de Chile.

Safe-haven interest was seen flowing into gold because of the current heightened worries over sovereign debt in the eurozone - notably Greece and Italy. There were advances elsewhere in the precious metals suite, with silver moving conclusively from $32 to $39. These uncertainties over the financial and monetary prospects in Europe will keep bullion markets on tenterhooks and prone to sudden price-swings, although gold may be able to decouple from the rest of the precious sector to some extent.

In my opinion traders and investors alike are apprehensive around these levels and are using economic data and Geo-political news to form their strategies day to day. It appears traders are not eager to hold positions and instead are quick to take profits when readily available. The market has been feeding off the U.S dollar strength versus the weakness of the Euro. The continued fragility in the European Union continues to drag on the Euro and therefore lending strength to the U.S Dollar.

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