It is one of those days when the flight to new reserve currency is on, with gold and silver trading near overnight highs, same for the oil complex, yet futures are also at the highs of the premarket session, purely on the ongoing monkeyhammering in the dollar, which has now completely given up the ghost as the reserve currency on yet another bout of QE3 concerns, following last night's very cautious note from Jan Hatzius. At last check the DXY was at 76.135 and plunging. As for why oil will continue whacking bits and pieces of Q1 GDP, and why Goldman will have no choice but to push for another round of dollar rape, here is Reuters with the skinny: "Brent crude rose to $118 a barrel and U.S. oil hit the highest since September 2008 on Monday as fighting in Libya disrupted its supplies and renewed concern of wider disruptions in the Middle East. While the Libyan crisis has cut supply from a country that normally provides almost 2 percent of world output, the prospect of unrest spreading to larger producers such as Saudi Arabia is a far more bullish scenario for oil markets. "The major risk remains the prospect of the
political unrest spreading to the Gulf producing region," said Caroline
Bain, economist at the Economist Intelligence Unit. "However, even if
there is civil unrest in Saudi Arabia, it is not a given that oil
production will be affected." Wrong: it is a given.
In Saudi Arabia, security forces have detained at least 22 minority Shi'ites who protested last week against discrimination, activists said on Sunday, as the kingdom tried to keep the wave of Arab unrest outside its borders.
Citigroup and Commerzbank raised their oil price forecasts on Monday and the latter is now looking for a Brent price of $120 in the second quarter, citing the risk that disruption could spread in the Middle East. Brent's highest this year is $119.79 reached on Feb. 24.
"Not only actual production losses but above all the threat of contagion spreading to neighbouring regions will keep the geopolitical risk premium at a high level for the time being," Commerzbank said in a report.
The rally in prices has prompted the Obama administration to consider releasing emergency oil stockpiles as policymakers seek ways to contain a negative spillover to the world's biggest economy.
Oh yes, the strategic reserve. As we predicted, this latest escalation of government central planning would only send oil prices to fresh highs. Once again, we were not all that far off.
And a snapshot of a humiliated former reserve currency: