Socio-Economics History Blog

Socio-Economics & History Commentary

Commodities Cap Biggest Monthly Gain Since 1974 on Dollar Drop

  • Commodities market are moving higher primarily because of the pricing in USD. The Chinese are exchanging their USD for commodities. This bull market looks like the beginning of the next commodities super cycle. Bloomberg reports :
      
    Commodities jumped, capping the biggest monthly rally in 34 years, as the slumping dollar bolstered demand for energy, metals and crops as a hedge against inflation.
     
    In May, the Reuters/Jefferies CRB Index of 19 raw materials gained 14 percent, the most since July 1974. The
    dollar touched the lowest level in five months against a basket of six major currencies.
     
    Signs of a recovery in the global economy have spurred demand for fuel, industrial metals and crops. Crude oil posted the biggest monthly gain in a decade. Gasoline soared 31 percent in May. Gold, silver and copper surged, while corn and soybeans reached the highest in about seven months.
     
    “The belief that the world economy is not going down into a black hole anymore has brought a lot of investors back in,” said
    Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Management in Cincinnati. “You also have the threat of inflation, and that means that people just want to have hard assets.”
     
    The CRB index gained 1.3 percent to 253.05 today, extending a rally to the highest since November. The dollar fell for the third straight month against the currency basket, partly on demand for assets with higher returns.
     
    Investors are seeking a “safe haven from a weaker dollar,” said
    Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. “This rally is sustainable, given prospects of the dollar, which is expected to weaken along with other industrialized countries’ currencies.”
      …..
    Still, U.S. business activity contracted at a faster pace than forecast in May as orders dropped. Unemployment, already at a 25-year high, is forecast to keep climbing and home foreclosures are at a record. Bankruptcy looms at General Motors Corp., the biggest U.S. carmaker.
     
    “I don’t know where all the optimism for the economy is coming from,” said
    Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York. “When you look at housing and autos, all of those things are still weak. There is a disconnect between what the reality for the economy is and what people think.”
     
    Crude-oil futures for July delivery rose $1.23, or 1.9 percent, to $66.31 a barrel on the New York Mercantile Exchange. This month, the price jumped 30 percent, the most since March 1999.
     
    Gasoline futures for June delivery rose 2.05 cents, or 1.1 percent, to $1.931 a gallon. The monthly gain was the biggest since March 2006. Gold futures topped $980 an ounce today, and silver had the biggest monthly increase in 22 years.
     
    Cotton surged 5 percent today, and copper climbed for the fifth straight month. The dollar dropped 4.9 percent this month against the currency basket.

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May 30, 2009 Posted by | Economics | , | Comments Off on Commodities Cap Biggest Monthly Gain Since 1974 on Dollar Drop

Max Keiser on Sovereign Debt Crisis

  • How long will it be before both US and UK sovereign bonds are downgraded from their ‘AAA’ rating? The market is already anticipating this and reacting by dumping treasury bonds and USD.
     
  • How will the biggest creditor nation: China react to this? They are caught with US$2T of USD denominated holdings. The Chinese are dumping their USD by buying record amount of commodities like oil, copper.. iron and gold.

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May 30, 2009 Posted by | Economics | , , , , , | Comments Off on Max Keiser on Sovereign Debt Crisis