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Commodities Snapshot: Oversold For Now, Dollar Holds The Key
By EconMatters
Below are trading range charts for 10 major commodities from the Bespoke Group.p. All All 10 commodities are currently at or below the bottom of their trading ranges, which would suggest at the moment, a good opportunity to get in at oversold levels for investors looking to gain long-term exposure.
However, U.S. dollar has been strengthening as investors fled the Euro debt and financial crisis seeking safety in the dollar. Since most commodities are priced in dollar, dollar movement will have considerable impact on commodity prices. EconMatters guest author, Frank Holmes at US Global Investors, estimates that a 5% appreciation in the dollar could be associated with a 25% decline in commodity prices, based on the relationship between the CRB Index basket of 19 commodities and the Dollar Index.
So if the U.S. dollar continues to strengthen, which is quite probable with the burning Athens, and the lack of leadership and clarity in the Euro Zone, it would most likely put downward pressures on commodity prices.
But on the other hand, the U.S. Federal Reserve has already telegraphed the intention of yet another round of quantitative easing (QE3). So the effect on the dollar, and thus commodities, would depend on how QE3 is implemented. We suspect that the Fed now understands how QE2 has artificially jacked up commodity prices as well as inflaiton (although they will never admit it in public), and most likely will strive for a "commodity neutral" QE3.
However, if QE3 does translate into a similar effect to QE2, then commodities would be artificially inflated even further, which would suggest stagflation, and hyperinflation could be expected in most of the developed countries, and developing economies, respectively.
Further Reading - Chart of The Day: The Slippery Slope of Sliver
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Chart Source: Bespoke Group, Oct. 20, 2011 |
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"...strive for a "commodity neutral" QE3."
How can you create commodity neutral quantitative easing?
let's play guess-a-chart
http://traderdannorcini.blogspot.com/2011/10/lets-play-guess-chart.html
and..."if the US dollar CONTINUES to strengthen..." like where - back to 77.9 on the DXY?
A haircut on greek debt leading to a five percent rise in the USD leading to a 25% decrease in the price of commodities! Perhaps this will lead to horses being able to speak Cantonese. Econmatters may have been getting its data from an expert psychic who makes her predictions based on the auras of crop circles in Norway...
Will an LSAP result in Banks lending to each other?
QE3 won't "artificially" inflate commodities.
It will inflate them, period.
Get a clue...
So commodities will go up . . . unless they go down.
Or something.
These idiots posted an article on silver which was pure bankster propaganda.
Tyler: please keep these disinformation puppets from posting.
I have been reading every article on the financial crises that I come
across for years now and I still come to the same conclusion that I
came to in 2008, and that is; There is no other credible or politically
acceptable solution to the world's debt problem than monetization.
I am now 99% sure that Europe, U.S.A., U.K., and China will address
their collective problems with quantitative easing. Printing money on
this scale will lead to world inflation. I doubt that our leaders will be able
to control the inflation once it gets started and we could end up with
hyper-inflation, which would cause chaos and extreme suffering for the
majority of the world population.
With a decades long over capicity buildout of Chinese manufacturing, offices, housing and malls (ghost cities), I believe the over 10 year bull market in commodities is coming to an end soon as bona-fide demand was strong, but now wanes. Did the dollar have an impact on commodity pricing? Sure, but it was purely from a pricing perspective as the solid underlying demand of the true physicals underpinned the currency exchange effects as the demand wasn't fungible. I am not suggesting we cannot see more price movements off currency, I am suggesting the effects of that will be increasingly muted going forward in time, until the world can catch up to the levels of capacity it has built out, thus starting the next commodity bull.
Oil and precious metals are the difficult ones at this juncture; oil being finite and subject to the supply problems of these middle east skirmishes not to mention the controlling cartels of said countries, and precious metals being more of a currency type investment than a true commodity with end use consumption such as most other commodities (foods, fiber, energy, etc). I am not willing to make any call on either of these two commodity classes. I will say pretty much all other physical commodities have run their cycle. I am not looking for a sharp drop off, more like a sideways to lower trending range for the next several years as the world copes with the house of cards it has built and consumers continue to increase frugality.
Rubbish. This guy couldn't recognize deflation if it sat on him.
if janet napolitano asked you if you wanted to do some crack, then proceeded to sit on your face, you'd deflate pretty quickly!
You should read the "sliver" article eCONmatters wrote.
It's a real doozzy.
Hey eveyone.
This guy puts Gold in the same class as coffee and orange juice.
And BELIEVES IT.!!!
To Fucking funny.
Says he believes it.
To fucking funnier is that this poor sod seems to think that the Fed reacts to economic, rather than political considerations.
It is all in now for obamma to have power post 2012. This increasingly weak regime requires increasingly weak players (actors) to prop up the play.
I'll keep feeding my short AUD/USD position however far it might float. I don't even give a shit about making money anymore. I'll lose everything a happy man if I lose it not assisting this bullshit.
When the Bulls crash, I will not be guilty of having lied to them.
This really does feel like 2007 again. Like good people are getting played into another suckers bet.
good one xitsam hehe
Everyone and their fucking dollars. The dollar is not worth anything!
If the dollar is up, comodities down.
On the other hand, if dollar down ________
However, if QE3 _______
Yes, you too can be a financial analyst! Just complete the blanks above and our expert panel of experienced analysts will tell you what kind financial phlebotomy is best suited to your level of vacuous validation! Earn money if the market is up or down! Only your customers lose! But it is important that you submit your application in the next 13 minutes to receive a free toaster. No one is turned down regardless of intelligence, knowledge or which prep school you attended!
It happened before so it has to happen again. The golden age of commodities. Who the fuck is gonna buy them when all they have is worthless paper??
On the third hand............................Oops
Dollar's going down, stocks and commodities going up, but even if this program is a similar size, it will not have the same effect because every additional round will have less and less effect. My guess is commodities stay elevated but after a few months but stocks start tumbling much soon than they'd like. Housing is turning into a disaster too with 60% of mortgage holder having less than 10% equity, the banks cannot afford a further decline and the recent uptick in rates has to have them sweating, so we might even get QE4 for Christmas!