Gold Moves to 9-Month Highs

U.S. 20-year Treasury bonds shot higher today,
moving to 6-week highs, on continued losses incurred by subprime mortgage
lenders. Bloomberg reported that the perceived risk of owning low-rated
mortgages surged towards the fifth straight weekly increase. Economic
weakness has surfaced in the form of major losses for mortgage lenders, which in
turn sent bond prices higher. Bond prices usually rise on weakness and
fall on strength, so investors are taking the recent subprime mortgage index
action as a negative for the U.S. economy.

The dollar fell against the yen and the euro
today, as bond prices moved higher on a weak subprime mortgage market. The
major currency focus, though, has been on the yen lately, which hit new record
lows against the euro yesterday. The yen has been under pressure on all
fronts, and also recently hit yearly lows against the dollar. The
international currency market has favored currencies backed by inflationary,
positive-growth economies, which puts the euro in the best light. The ECB
has been on a consistent rate-hike schedule, while Japan has struggled to find a
reason to raise the overnight rate.

Crude oil rose fractionally today, holding ground
above the $60 a barrel watermark. Crude shot higher yesterday after the
Energy Department reported a major decline in U.S. fuel inventories, and many
investors speculated that more supply losses are to come. Crude struggled
for nearly 3 weeks to break key resistance at 60, but it was the supply report
that finally pushed prices over the edge. Crude fell more than 30% from
record July highs before finally bouncing in mid-January, when cold weather
arrived in the U.S. Natural gas rose over 0.5% on similar supply

Gold continued to rise, moving to 9-month highs
today, on an overall commodity rally. Commodities were boosted by the CPI
report on Wednesday, which showed that consumer prices were rising faster than
expected, and that inflation was somewhat of a concern. Gold usually
trades inversely to the dollar and with oil, but today’s movement could be seen
within the framework of a broad commodities rally. Copper rose over 3%
during today’s session.

Grains fell across the board today on overall
signs of weakening demand for U.S. exports. Wheat fell about 0.6%, corn
fell just over 1% and soybeans fell about 0.7%.


No major economic
news to report for the U.S. today.

John Lee

Associate Editor