Oil’s Slide Boosts Gold

U.S. 10-year Treasury notes rose fractionally
today, as traders prepare for major corporate bond selling in the U.S.
Analysts estimate that U.S. companies could sell $15 billion in corporate bonds,
which could give them more leverage to buy U.S. bonds, sending prices higher.
Bond prices have been whipsawing on positive reports and underlying negative
sentiment; the U.S. economy seems to struggling to rebound from weak growth and
a housing market slide, and recent reports point to positive growth and
inflation. Last Friday’s jobs report sent prices lower on U.S. economic
strength, but housing market negativity pervades widespread sentiment.

The dollar pushed higher against the yen and the
euro today, as crude oil sank to its lowest levels in over a year. Traders
bet that the low crude prices would boost opportunities for U.S. growth, thereby
helping the dollar on the international market. The dollar has been
strengthened in the last few weeks by a string of positive U.S. economic
reports, which point to a rebounding U.S. economy, highlighted by positive jobs
reports and a turnaround in housing. The yen has been struggling, with
Japan failing to produce any consistent positive economic news. Despite
the dollar’s recent push against the euro, Europe is well-set with a hawkish
central bank and inflationary, growth-oriented numbers.

Crude oil fell nearly 1% to close at 18-month
lows, as warm weather and high supplies continue to push prices lower.
OPEC has repeatedly called for major reductions in global supplies, but those
cuts and warnings are having little effect on price. Crude is down over
25% from record July highs. Natural gas rose nearly 4% as forecasts are
calling for a cold front to hit the U.S. in the next two weeks.

Gold rose nearly 1% as investors turned away from
the slumping energy market in search of more profitable commodities action.
Gold usually moves inversely to the dollar and with gold, but the metal did not
act normally today. The relatively low price of energy has forced
investors out of that market, and in a surprise move, has sent gold higher
today. Copper prices rose under 0.5% on production worries stemming from a
rockslide in Chile.

Corn fell 1.3% on worries that cheap fuel prices
will reduce demand for ethanol, and soybeans fell nearly 2% on similar
alternative energy worries. Sugar prices also fell, down 0.5%, on fears
that low energy prices will reduce demand for ethanol, which sugar is used to

Economic News

No major U.S. news to report at this time.

John Lee


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