Oil and Gold Move Higher

U.S. 10-year Treasury bond prices rose
fractionally, after a $9 billion sale in 30-year notes were sold at a lower
yield (higher price) than what was expected. The government has conducted
a number of bond auctions this week, and prices have been moving steadily higher
on a diminishing supply of U.S. bonds. Bond prices usually fall on
economic strength and rise on weakness, so investors are seeing the bond supply
issues as a negative factor for the economy. Bond prices shot up in June,
when the Fed initiated a rate-pause on the grounds of slowing growth and
moderating inflation. However, since December, the U.S. has been able to
produce strong economic numbers from key housing, manufacturing and confidence
reports, which led to 5-month lows for bond prices. Prices are back on the
rise in the last few days, though, after consolidating for much of last week.

The euro pushed towards record highs against the
yen, and moved higher against the dollar, after ECB President Trichet hinted
that European policy makers were set to raise rates in Europe again next month.
The currency market has favored currencies backed by inflationary,
positive-growth economies, which Europe has proven itself to be. The euro
has recently pushed to record highs against the yen and yearly highs against the
dollar. Earlier this week, the yen saw some strength on speculation that
this weekend’s G-7 meeting would focus on yen weakness, but Japanese officials
commented that those reports were false. Japan has been struggling to
produce positive economic numbers, and the yen has suffered as a result.
Recent strength in U.S. economic numbers has propelled the dollar off lows
against the euro, but European strength continues to dominate the currency

Crude oil rose over 1.5% today, on heightened
demand stemming from the recent cold snap in the U.S. Crude oil fell over
30% from record July highs, on cushy supply levels in the U.S., and an
abnormally late winter. Energy prices usually rise on sustained cold
weather, as more energy is needed to heat homes. Crude has been pushing
against resistance at 60 for a few days now, and that level seems to be key
resistance for prices to beat. Natural gas futures rose nearly 1% as cold
weather forecasts call for more cold for the next 2 weeks in the northern U.S.

Gold futures rose nearly 1% today, as weakness in
the dollar and a rise in crude prices increased demand for the precious metal.
Gold prices usually move inversely to the dollar and with oil, which is exactly
what happened today. Traders turn to gold as a safe-haven in the face of
dollar weakness and rising energy prices; today, the dollar fell against the
euro, and crude oil rose on weather concerns. Copper fell fractionally
today, erasing moderate losses from earlier in the day to close barely lower.

Grain futures rose across the board today.
Soybeans rose 0.3%, wheat rose about 1.3% and corn rose nearly 2%.


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

John Lee

Associate Editor