Crude Dips Below $70 Briefly As Gold Falls
U.S. 10-year bond yields continued to fall today after the
Michigan Consumer Confidence Index was released today, showing an unexpected
decline. Bond prices shot up earlier in the week on the PPI and CPI
reports, both of which showed slowing inflation and a cooling U.S. economy.
Bond yields are expected to remain near these lows ahead of the Fed’s meeting in
September, when the Fed committee is widely expected to not raise rates, without
the need to contain inflation.
The U.S. dollar closed the week down on both the euro and the
yen, after a tough week of economic reports showing a slowing economy and
contained inflation. Without inflation to worry about, the Fed will not
have to raise rates at the next Fed meeting. Conversely, both Europe and
Japan are expected to raise rates before the year is out. Most investors
are bearish on the dollar, as the euro and yen are set poised to move up on
their growing economy and rising rates.
Crude oil futures rose 1.5% to close at $71.14, despite
dipping below $70 briefly in today’s trading. Oil rose on speculation that
demand will not decline as much as previously thought. The situation in
the Middle East has struck fear into crude investors, on notions that Iran’s
supply of oil could be removed from the world market. Falling inventories
have also affected sentiment, as inventories have fallen over 4% since June.
Natural gas also rose today, closing up 0.6%.
Gold fell 0.6% on speculation that demand for oil will indeed
fall over the next few weeks. Gold and oil have traded hand-in-hand over
the past months, and gold’s move could be seen as pre-emptive in the face of a
general slowing of the U.S. economy. Copper rose nearly 2% after a strike
in the world’s biggest copper mine escalated, as workers blocked the roads to
the mine.
Softs fell across the board, with cocoa down 1.3%, coffee down
fractionally, orange juice down 1.5% and sugar down fractionally.
Grains traded mixed for the day. Corn rose fractionally,
wheat fell slightly, soy dropped 0.8% and oats also fell 0.8%.
Meats traded mixed today, with cattle down fractionally and
porkbellies rising 2.7%.
Philly Fed Index Rises Much More Than Expected In August (full
story).
John Patrick Lee