Price of commodities rebound and set to rally

Price of commodities rebounded strongly in the past few days as investors seek to come back to commodities amid weakening US Dollar and the unease about the U.S. government's US$700 billion bailout plan which was criticize by many analysts and well-known investors.

Price of commodities which fell sharply since early July has been very oversold and the technical rebound is now happening and price should correct upwards to the next resistance level.

Yesterday price of light, sweet crude oil in the NYMEX futures contract (which expired yesterday) made its biggest one day jump of US$25 at US$130 a barrel before settling down to close at US$120.92, up US$16. The exchange halted electronic crude oil trading after prices breached the $10 daily trading limit but was resumed seconds after the limit was raised. The price of gold shot up more than $44 to settle at $909 an ounce. Crude Palm Oil futures in Bursa up RM74 per tonne to close at RM2,259.

The correction: Price of light crude oil is expected to correct to test US$130 again. Its 100 day average is at US124. Price of gold may find resistance at US$950. Price of crude palm oil is expected to correct upwards to the next resistance at RM2,800.

Equity markets declined, lead by a fall of 372.75 pointsor 3.3% in the Dow Jones Industrial Average. Other markets are expected to decline further after substantial gains in the past few days as there is still room for commodities prices to increase.

Commentary and Analysis by Benny Lee