Breaking News
Get 45% Off 0
🌊 NVIDIA ripple effect: Track AI stocks' response to chip giant's earnings
Explore AI Stocks

Away From Oil And Gold, Cotton Holds Promise For Buy-In

By Barani KrishnanCommoditiesOct 11, 2019 17:21
ph.investing.com/analysis/away-from-oil-and-gold-cotton-holds-promise-for-buyin-20168
Away From Oil And Gold, Cotton Holds Promise For Buy-In
By Barani Krishnan   |  Oct 11, 2019 17:21
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
XAU/USD
+0.13%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Gold
+0.11%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Copper
+0.04%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
LCO
-0.26%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CL
0.00%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CT
-0.71%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

As this week began, we warned that the macro picture might completely hijack the oil and gold markets, leaving both at the vagaries of U.S.-China talks and rate cut speculation.

Given that these have been recurring themes through 2019, such caution might hardly be news. Yet, our point was to gird yourselves for as little meaningful price action through the week as possible.

Indeed, crude’s WTI and Brent benchmarks barely changed more than a dime either way the first three days, before breaking out on Thursday on reports of an imminent deal from the trade talks, as well as OPEC’s hint that it might cut more supply when it meets in December.

Gold, which saw just a 50 cent change on Monday, finally tanked on Thursday as the Fed remained evasive on its next easing.

Until more is known on all this, we are continuing with this week’s select coverage of commodities with new buy-in opportunities. With the recent focus on sugar, corn and orange juice, we turn today to cotton.

Cotton is one of the most widely grown non-food crops and a stable source of income to the textiles industry. Once a revered raw material, even earning the phrase “Cotton is King” in the 1800s, prices of the fibrous product these days often fare no better than those of copper, another ubiquitous but struggling industrial commodity.

Yet, cotton may be getting a break hereon if U.S. production of the fiber keeps declining.

The other thing that could work in its favor is a trade deal of some sort between the United States and China—the latter being the world's biggest cotton consumer.

Production Slide, U.S.-China Trade Deal Seen To Boost Prices

The World Agricultural Supply and Demand Estimates for cotton, a monthly report released by the U.S. Department of Agriculture on Thursday, showed production down by around 1% to 21.7 million bales this month—largely the result of a reduction in Texas.

That in itself wouldn’t be a major price driver. But combine it with Thursday’s report by the New York Times that there may be a partial U.S.-China deal announced before the end of this week, and you may actually see cotton getting a lifeline.

Said Eric Scoles, a commodities strategist at RJO Futures who’s been watching cotton trends:

“Production estimates have been in decline due to weather this season and some suggest it could be worse than anticipated. With increasing concerns on production, cotton prices have been leaning bullish in momentum through this consolidation channel.”
“There has been some recent optimism going into this next round of US/China trade talks with hopes of a partial deal, which could offer additional fuel for rising prices.”
“If upcoming news and reports are bullish, we could see cotton not just break out, but start a more sustained bull run.”

Bullish Calls On The Rise

Cotton futures on ICE Futures U.S. have seen a hive of activity, hitting six-week highs of 63.30 cents a lb on Sept 13.

Cotton 300-Min Chart - Powered by TradingView
Cotton 300-Min Chart - Powered by TradingView

At Thursday’s settlement, ICE’s benchmark December cotton stood at 61.56 cents. While the price action has been virtually flat on the week, month-to-date it was up 1.7% after a gain of 3.2% in September—its first positive month after five straight months of losses.

Investing.com’s Daily Technical Outlook has a “Strong Buy” recommendation on December cotton, projecting near-term resistance at 63.33.

Mike Seery, a commodities strategist in Plainfield, Illinois, said he has been recommending a bullish position in cotton from around the 61.50 level:

“This trade has been very stubborn. I still believe higher prices are ahead and you can be profitable if you place stop loss at the Aug 26th low of 56.59.”

Seery said he had various bullish calls for cotton based on USDA crop progress reports showing 77% of the bolls—or the rounded seed capsule of cotton plants—having opened in Texas and harvest at 25% complete.

ICE’s December cotton contract is currently trading above the 100-day Daily Moving Average and below the 200-day DMA. Major resistance remains at 62.81.

Said Seery:

“For the bullish momentum to continue, prices have to break the Sept 13 high of 63.39. If that situation occurs, the next level of resistance is all the way at the 65 area.”

“I don’t think the low volatility situation in cotton is going to last much longer.”

Away From Oil And Gold, Cotton Holds Promise For Buy-In
 

Related Articles

Frank Holmes
Gold: Is It Time for the US to Revalue Its Reserves? By Frank Holmes - Feb 25, 2025

Gold prices surged to an all-time high of $2,940 per ounce last Thursday, pushing its market cap above $20 trillion for the first time ever, as trade tensions between the U.S. and...

Away From Oil And Gold, Cotton Holds Promise For Buy-In

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Apple
Continue with Google
or
Sign up with Email