Saturday, August 15, 2009
Is sugar the new gasoline?
Could be if you believe the folks making market predictions. Sugar prices currently looks poised for a speculative rocket ride to the stratosphere.
Earlier in the week we noted that the price of sugar hit a 28-year high because drought in India and rain in Brazil — the top-two producers — have reduced crops. A contributing factor is the increasing amount of sugar being used to produce ethanol fuel. As a result, hedge funds and other speculators are betting the price will rise further. Their bets paid off yesterday: it jumped 4.4%.And the signs are pointing to a hedge fund retreat from their efforts to drive the price of gasoline up to the profitable levels they want.
Gasoline futures may fall from $2.02 a gallon to $1.76 by mid-September and below $1.35 by the end of the year, according to technical analysis by Infinitytrading.com.If the great wads of speculative money follows the usual herd pattern, we should see $Billions piling into the sugar futures market any day now.
The front-month gasoline contract is poised for a slide to $1.9575 within seven to 10 days and then $1.7619 within 30 days, said Fain Shaffer, president of Infinitytrading.com, a commodities brokerage in Medford, Oregon. Prices may then reach the April low of $1.3411, he said.
“We’re coming out of the peak demand time, we’ve seen the highs in the market and could be setting up for a pretty good fall,” Shaffer said in an interview. “I think we may have seen a peak in the market at $2.08. The next objective is $1.95 and from there we could free-fall.”
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