Gold Slides and Bonds Rise

U.S. 10-year Treasury bonds rose today, securing
their biggest weekly gain in five months, as the global stock market continues
to sell off. Investors turned to bonds this week as major selling occurred
in the global equities market; traders looked to the long-term bonds as a safety
against plummeting markets. Bonds usually rise on economic weakness and
fall on strength, so it is clear that most investors are taking this broad move
lower as a serious negative for the U.S. and global economy.

The yen surged against the euro and the dollar
today, as investors continued to unwind carry trades with the yen, which are
borrowed to buy more profitable assets. The global selloff sparked a major
move in the yen this week, which should close this week with the largest gain
against the dollar in over a year. The international currency market
favors currencies backed by inflationary, positive-growth economies, which led
to major lows for the yen on continued economic weakness. However, the
global plunge has led to a major snap-back for the yen against other currencies,
as the currency reasserts itself on a global scale.

Crude oil futures fell nearly 1% today, on
speculation that global growth is slowing, and that slow growth will equate to
less fuel consumption. Crude struggled to break through $60 a barrel for
weeks before managing to break and hold last week on diminishing fuel reserves
in the U.S. Investors took the recent global selloff as a negative for
crude, under the logic that with less money and growth, there will be less of a
need for energy use. Natural gas futures fell fractionally today.

Gold futures fell over 3% today, ending a week
which saw gold futures down nearly 6%. The global selloff effected
commodities significantly, as traders moved to other safe-havens like bonds to
protect assets. Gold usually moves inversely to the dollar and with oil,
but gold action this week can most likely be attributed to a hit in the global
equities market. Copper fell nearly 2% on similar concerns that a global
slowdown will equate to less investments in commodities.

Grains fell across the board. Wheat fell
nearly 1%, soybeans fell just over 1% and corn dropped by 1.7%.


The Michigan Sentiment Index fell to 91.2 in February, less than the forecast 93.3.

John Lee

Associate Editor