COMMODITIES: Bubble Burst or Correction?

Prices of commodities has been declining in the past few weeks. While many analysts forecasting a commodities bubble burst as early as end of this year, is it already happening? The US Fed has decided to maintain the interest rates and this spurred the equity market. Let's take a look at some major commodities prices traded in futures exchanges.

Crude oil fell as much as 17.9 percent to US$118 a barrel yesterday, from the high of US$145 in July. It is its lowest since May this year.

In LME, Gold fell 10.2% to US$881.80 an ounce from US$980 in July, its lowest since June.

Price of rubber in TOCOM fell 9.5 percent to 316.7 Japanese yen per kg from the high of 350 yen in July, its lowest in two months.

Price of Crude Palm Oil fell 22.5 percent to RM2,790 from RM3,600 in July, 35 percent from RM4,300 in March. Other edible oils like soyoil are facing the same situation.

From the charts above, the prices are still in a correction. Support levels are established using a simple long term trend line (blue line on the charts), and these are levels where the prices of these commodities may find support. Therefore, technically the bubble has not burst, except for the price of Crude Palm Oil, which may head to RM2,000 per barrel.

Commentary and Analysis by Benny Lee