Copper Rises with Housing

This week, a slew of housing data was released, which showed continued strength in the housing market. The widely-followed Case-Shiller Index showed a rise in home prices of 3.0% across 20 major metropolitan areas. Meanwhile, the pending home sales index showed a 5.2% increase over the previous month.

These strong numbers inspired commodity traders to flock toward copper on expectations that strong housing demand would increase the need for copper wiring & pipes. In the United States, nearly half of all copper is used in construction, making that sector essential to determining copper's valuation. Prices rose 9.3 cents per pound (+2.6%) this week, with December copper climbing to a five-week high on Friday at $3.62.

Natural Gas Sinks

An unexpected rise in national natural gas inventories turned the market sharply lower this week, pushing prices near two-month lows. Despite the persistence of below-freezing temperatures across much of the Midwest, temperatures are above-normal for the region for this time of year, which has curbed demand for heating fuels, especially natural gas.

Driven by the supply increase and forecasts for continued mild weather, natural gas futures plummeted over forty cents per million British thermal units (MMBtu), a drop of more than 10%. Despite low prices, U.S. natural gas production continues to rise, with 2012 production projected to be 4% higher than 2011. Some analysts warn that another warm winter, coupled with strong natural gas production, could cause supplies to overrun storage capacity in the United States by next fall.

For now, prices are dropping just as consumers begin to look toward the winter months, suggesting another year of reasonable heating costs. As of midday Friday, natural gas for January delivery was worth $3.59 per MMBtu.

Cotton Bounces

After falling sharply last week, cotton prices rebounded this week, climbing 2.65 cents per pound (+3.7%). The rally came as bargain-hunters swooped into the market, anticipating that prices would rise long-term as the Chinese build stockpiles and global farmers switch to planting more lucrative crops. As of midday Friday, cotton for December delivery was worth 72.35 cents per pound.