(eToro Blog) J.P. Morgan reported that commodity prices tumbled last week, with the S&P's GSCI All-metals Spot Index dropping 11.2%. That was the largest decline in nearly three years, and only the second in eight years. Analysts can't pinpoint any single thing that could have triggered the liquidation, citing instead a whole host of events. That included the ECB's surprising rate stance, disappointing U.S. labor data and German manufacturing data, growth concerns in emerging markets as monetary tightening begins, and the sharp drop in the price of silver.

They also can't attribute the drop in commodity prices to a lack of fundamentals, which they see as still constructive. They caution that, even with favorable data, as with the case of the non-farms payrolls, prices can still tumble.

Even so, J.P. Morgan notes that last week's declines provide good market entry points, especially as it relates to oil. In their opinion, the drop in crude oil prices simply wasn't warranted given the current and expected future fundamentals. They note that there are still disruptions in supply as the problems in the Middle East and Northern Africa continue.

According to their Commodities Report, the markets appear to be honing in on slowing demand from OECD nations, in particular a weakening in U.S. demand for gasoline, as proof positive that the crude rally is nearly over. They argue that non-OECD demand for oil is still robust, enough to lift global demand, and with a tightening bias looming.

Reinforcing J.P. Morgan's analysts' position that the recent oil price drop below 110 presents a buying opportunity, eToro traders apparently are in agreement, with sentiment in favor of buying by 8 buyers to 3 sellers.

Copyright 2011 eToro Blog

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