Gold and Oil Bounce Back

U.S. 10-year Treasury bonds fell today for the
first time in four days, after Fed Chief Bernanke said that he expects moderate
growth this year. Bonds shot up to their highest levels so far this year
yesterday, as investors bought bonds as a safety against major weakness in U.S.
and global stock markets. Prices gave back a large percentage of those
gains today, despite a downward revised GDP number from Q4 last year.
Bonds usually rise on economic weakness and fall on strength, so most traders
took Bernanke’s comments and the revised GDP as a positive for the U.S. economy.

The dollar rose against the yen and the euro
today, on positive comments from Fed Chief Bernanke. Bernanke said that he
expects “reasonable” growth in the middle of this year, and investors took those
as hawkish comments. The dollar rose on expectations of future economic
strength, and helped propel the dollar off recent lows. The yen also fell
against the euro today, after a solid bounce yesterday. The international
currency market favors currencies backed by inflationary, positive-growth
economies. Bernanke’s comments today were positive-growth, and Europe has
consistently proven its strong economy. Japan, however, has had major
trouble convincing investors of strength, and the yen has struggled because of

Crude oil closed up around 3% today on a rebound
of U.S. and Chinese stock markets. Yesterday’s global slide worried some
investors that fuel consumption would drop on weak markets. A positive
reversal in the markets helped assuage those fears, and oil moved higher on
positive-growth and consumption sentiments. Natural gas futures fell 3% on
continued demand worries.

Gold futures rose over 1% today on speculation
that gold’s fall yesterday was an overreaction. Gold fell over 3%
yesterday in a broad commodities slide that was spurred on by a global selloff.
Gold usually trades inversely to the dollar and with oil, but yesterday gold
trading was dominated by global equities fear. Today’s bounce could be
seen as a natural rest period after a dramatic move yesterday. Copper fell
over 3% on weakness in U.S. new-home sales and manufacturing.

Grains rose across the board today. Corn
rose nearly 6%, wheat rose 3.5% and soybeans moved higher about 3%.


New home sales
fell the most last month in 13 years.

John Lee

Associate Editor