Investors Struggle with Exceptionally Volatile Commodity Markets

Gold and oil seesawed in recent trading activity and finished mixed as pressure from end-of-month profit taking and mixed U.S. economic readings were countered at times by hopes for new central bank stimulus measures and big declines in the gasoline inventory.

Trading in most commodity markets was choppy, as investors adjusted their books for the end of an exceptionally volatile August, a month typically slowed by summer vacations. Arabica coffee and raw sugar futures on ICE eased back, tracking a setback in a wide range of commodity markets including grains and base metals. Note that you can speculate on coffee futures with

Other financial markets, including global equities, were also losing ground with investors entering the month in one of the most bearish moods seen lately. Corn, soybeans and wheat also rose as investors in agricultural commodities focused on fundamentals such as crop yields.

Industrial commodities dropped after the figures, and traders and analysts said they would have fallen further except that the weak data made it more likely the U.S. Federal Reserve would launch a third round of government debt purchases, or quantitative easing, known on Wall Street as QE3.

Also in commodities, U.S. natural gas futures ended lower in recent trading activity, as East Coast power outages left in the wake of Hurricane Irene and moderating U.S. weather slowed overall demand and helped drive the September futures market to a soft expiration.

Hurricane Irene, which tore up the East Coast, left more than 5 million homes and businesses without power, but there are no indications of any serious damage to gas pipeline and power plant infrastructure.

The natural gas price declines came as comfortable supplies, a weak economy and forecasts for milder weather trumped concerns about a Gulf Coast storm.

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