NEW YORK: ICE cotton staged its biggest one-day gain in over seven months and settled limit up on Monday as speculative investors piled back in to buy after prices sank to four-month lows at the end of last week.
Bringing an end to a nine-day losing streak, prices jumped 2.5 cents per lb in the final 90 minutes of trading as speculators piled back in betting on tighter US supplies with just two months until the end of the 2012/13 season.
Traders saw no obvious trigger for the sudden surge late in the morning, but Ron Lawson, a partner at commodity investment firm LOGIC Advisors, said the market had finally woken up to the bullish factors that he expects to support prices.
"You had nine days down and it ran out of selling. The US is sold out. Australia is sold out. China's been buying. The only cotton left is certified stock," he said.
The most-active July cotton contract on ICE Futures US rose 3 cents, or 3.8 percent, to settle at 82.36 cents per lb, its daily limit price. That was its best one-day performance since October.
Synthetic prices of 82.66 cents per lb released by the exchange indicated prices would likely rally further on Tuesday.
Traders report that physical supplies for the current season which ends on July 30 are depleting due to healthy demand from China, which has forced mills and merchants to buy fiber on the exchange, the world's No. 1 textile market.
Lawson says US availability may tighten further after the 2012/13 ends and before the next harvest in December.
Even so, the bears point to sluggish overall demand and a massive global surplus - Beijing is holding more than half the world's cotton off the market in its reserve. Certified stocks stand at over 517,000 bales.
The rally got June off to a buoyant start, even as indices sold the front month and bought December in their roll, and followed two months of losses.
Traders expect higher volumes ahead of July options expiry on June 14.
Fiber outperformed a buoyant broader commodities market.
The Thomson Reuters-Jefferies CRB index, a benchmark for global commodities, was up over 1 percent on Monday even as weaker US and Chinese manufacturing data reinforced concerns about weakening economic growth in the world's two biggest economies.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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