Friday March 20, 2009

Gold jumps over $950, crude oil rises above $50 as inflation concern spurs commodities

bloomberg.com :

Gold prices jumped the most since Sep 2008 and crude oil exceeded $50 on speculation the Federal Reserve's steps to spur growth will revive demand for commodities as a hedge against inflation. Gold futures in New York rose above $950 an ounce on COMEX after the Fed said it would buy as much as $300 billion of U.S. government bonds, adding to the supply of dollars. The Fed is keeping its main lending rate at almost zero. Silver, platinum and palladium also gained.

Crude oil prices for Apr 2009 delivery rose as much as $3.51 to $51.65 on NYMEX. Prices remain 65% below Jul 2008's record high of $147.27. The US Dollar Index dropped for an eighth day, potentially boosting demand for commodities as an alternative asset.

- The crude oil 50/200-dma crossover that I had been talking about earlier seems to be coming along nicely. It would be great if it could hold for a while above the $50 level to confirm that it has transformed from a resistance level to being a support level. As for gold, I had been looking for a potential head & shoulders pattern which might not materialize after all, what with the Fed's printing press bombshell that they unleashed on an unsuspecting market the day before. I would be looking at $950 now as a potential intermediate support level, with strong support at $900.

We have to bear in mind of course that the inflationary impact wouldn't make its way into the real economy just yet - there is always a lag time involved. Some contrarians say that would be 6 months while others say it could be up to a year before we'll see any effect on actual street prices of things. So, whether this is a short-term knee-jerk reaction or whether crude oil and gold are really on a rocket ride to the stars, we'll have to wait and see.

See also :

1. US Dollar Index (USDX) crashes below 80 after Fed rate cut to zero percent, ZIRP era begins
2. NYMEX crude oil recovers from $32.40 low after 2.2 mbpd OPEC production cut announced
3. NYMEX crude oil near $47 after surge as OPEC weighs production cut
4. US dollar index falls below 84 as Fed ramps up printing press

(2009-03-20 20:56:16 SGT) [Energy] Permalink

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