Gold, Oil and Bonds Extend Gains

U.S. 10-year Treasury bonds rose today to nearly
2-month highs, on expectations that housing reports to come later this week will
show weakness. Bonds shot higher last week on subprime mortgage worries.
Bond prices usually rise on economic weakness and fall on strength, so a major
move higher in bond prices evidenced a general uneasiness towards the U.S.
economy. Bonds have been rising fairly steadily since the beginning of
February, on weaker than expected housing reports.

The yen rose against the dollar and the euro
today, after a Japanese government official said that the economy has recovered,
opening the door for rate hikes in the near future. Japan has struggled to
produce economic numbers worthy of a rate-hike, pushing the yen to record lows
against the euro and 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 yen should remain in
the spotlight in the coming weeks.

Crude oil futures rose 0.5%, on speculations that
this week’s Energy Department report will continue to show major losses in U.S.
fuel reserves. Last week, crude broke though crucial resistance at $60 a
barrel and held, on news that stockpiles of U.S. fuel fell dramatically from the
week before. Crude fell over 30% from record July highs before bouncing on
cold weather. U.S. plans to double its strategic oil reserve have also
helped to boost oil and hold above 60 a barrel. Natural gas futures fell
over 1% on speculations that the worst cold weather is over, and that energy use
will decline with spring.

Gold futures rose 0.5%, pushing 9-month highs, as
oil moved higher today. Gold usually moves inversely to the dollar and
with oil, and it was oil action that dominated today’s gold trading.
Traders bought gold as a safe haven against rising energy prices and inflation
worries, extending a broad commodities rally which was boosted by last week’s
CPI report. Copper rose just over 0.5% today.

Grains traded mixed today. Wheat fell
nearly 0.5%, corn fell about 0.1% and soybeans rose fractionally.


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

John Lee

Associate Editor