Prospect of US QE2 next month pushes commodities higher, across the board.

Gold just fell short of $1400/oz last week, and is likely to trade sideways until confirmation of stimulus is official from the Fed, due to meet on November 3rd.

However Gold is not the only commodity to remain strong. Copper rallied 0.6% to $8,492/mton, the highest level for over 2 years; fuelled by depleting stockpiles globally. Domestic demand in China for silver may result in a dramatic drop in exports to the rest of the world, pushing prices higher. And last week, Palladium also climbed to a nine year high. Even agriculturals advanced yesterday, following recent declines.

Strength across the mining sector, only makes global mining leader BHP Bulletin more attractive, along with rival Rio Tinto, which are both likely to remain high up on the ‘buy’ lists of many commodity analysts.

But we must remember that QE2 is firmly in the price of both commodities and the major currency pairs; so caution should be shown, as further economic stimulus materialising from the US next month, will no doubt underpin recent gains, but may result in some profit taking and therefore choppy trading conditions.

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About Simon Brown
Simon Brown has over 20 years experience trading Derivatives on everything from Gold, FTSE to Dollar/Pound. Simon has lectured in Trading Psychology, Strategy and Technical Analysis, in addition to regular appearances on CNBC television. He is now Managing Director of ProSpreads.

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