Friday, September 15, 2006


Commodities Not A 'One Way Bet'

The Financial Markets site has this on the greenback. "The US dollar strengthened somewhat on Friday after new consumer price inflation data showed that consumer inflation was up 0.2 percent month-on-month, putting the annual core inflation rate at 2.8 percent, about what had been expected. Meanwhile a consumer sentiment survey showed that the mood of US consumers was better, mostly due to declining energy costs."

"Meanwhile, the Swiss franc weakened during the week after the Swiss National Bank raised rates to 1.75 percent on Thursday. The Swiss currency was 0.7 percent lower over the week versus the euro, to a 6½ year low."

"The Canadian dollar slipped against the U.S. currency on Friday, as soft commodity prices weighed, while the greenback benefited from position-squaring ahead of a weekend Group of Seven meeting."

The "Gold was slumping again Friday as benign price data helped reduce investor concerns over inflation. Contracts for December delivery of gold were recently sliding $7.30 at $578.70 an ounce on the Comex, as expected resistance at $580 failed to materialize."

"'I think the bigger picture here is that there is now a dawning realization that the U.S. economy is slowing,' says Anirvan Banerji, director of research at the Economic Cycle Research Institute in Manhattan. 'Today's inflation number would have contributed to that feeling.'"

"Other observers point to a radically changed outlook for the world, compared with that seen only a few weeks ago, as a factor driving gold prices lower."

"'When investors came back from the summer holidays they saw a rising dollar and a cease-fire in Lebanon,' says Matt Turner, a metals analyst at Virtual Metals. When compared with the previous scenario 'maybe commodities didn't see such a one-way bet.'"

"Turner also notes that the metals meltdown seen in late May and June and which took spot prices as low as $569.75 an ounce from a high of $725.25 on May 12 may have been stemmed by Barrick Gold's aggressive second-quarter program of dehedging. Unwinding short positions would have resulted in bullion buying on the open market and could have provided a floor for sliding prices."

The Shanghai Daily. "Linking China's currency reform to America's growing trade deficit is 'detrimental to both sides,' a Ministry of Commerce spokesman said yesterday. Spokesman Chong Quan's remarks came after two US senators threatened to push for a vote on punitive tariffs against China for not making enough progress in reforming its currency regime."

"China began revaluing its yuan in July last year by eliminating its peg to the US dollar and linking it to a basket of currencies and allowing it to float within a 0.3 percent daily trading band. The currency has strengthened gradually over the past 13 months, gaining 4 percent since the revaluation began."

"To ease the trade imbalance, the State Council, China's Cabinet, is devising policies to facilitate imports. In addition, China's central bank may widen the yuan's trading band against the US dollar in the fourth quarter or early next year, a senior economist said yesterday."

With gold falling as the US looks to be going into a recession, is the market predicting deflation?
If you define deflation as a contraction of the money supply, I'd think so. Credit is contracting, and velocity is slowing, if incrementally so.
TJ, Where is credit contacting?
Economist, Money at Zero Maturity is contracting. Every other measure of liquidity seems to be as high as ever. We are drowning in liquidity.
Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?