Cotton reached record highs on Tuesday though U.S. stocks fell for the second straight day, Bloomberg reports.
The soft commodity assisted with spearheading other commodities' gains by increasing the 0.5 cent exchange limit to a high of $1.4711 per pound in New York. Cotton futures helped push up the broader commodity index by rising 5 cents, the exchange-imposed limit, to a record high of $1.4711 per bushel. The U.S. Agriculture Department had decreased estimates for inventories and production of cotton in the U.S.
"People don't feel like they're losing out by holding commodities," said David Goerz, who oversees $17 billion at Highmark Capital Management Inc. in San Francisco. "If you’ve lost confidence that stocks can deliver returns, then commodities make sense on a long-term basis."
Chinese demand for cotton has played a significant role in the commodity's value given the country's cotton producing provinces have endured inclement weather that has severely reduced its capacities of cotton production. Consequently, China – the world's largest cotton consumer – has been forced to import it, thus depleting inventories.
After the People's Bank of China increased a reference rate for trading the currency, the Chinese yuan appreciated 0.6 percent.
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
