Commodity Strength: A Quick Look

Barchart.com is one of my favorite sites for reviewing futures markets. Above (top chart) we can see that commodities (S&P GSCI Commodity Index, cash) have broken out to multimonth highs on the strength of gold and oil. A weekly chart (bottom) places the move into context; we remain well below the late 2007/early 2008 peak. Nonetheless, the moves to new 2009 highs have raised fresh concerns about the future inflationary impact of monetary ease in the U.S. and the U.K.

Comments

[Pauly B:]

Too much spending by congress and debt buybacks by the FED and not enough firm FED policy are causing commodities to rise. Finally this week Barrons is questioning what the exit strategy is for the FED!

Oct 18 09:07 AM

[Mad Hedge F...:]

oin Those of you searching for the “new normal” better take a close look at the China National Offshore Oil Company’s (CNOC) efforts to top Exxon Mobil’s (XOM) $4 billion bid for development rights to a giant new field off West Africa. This is only the latest chapter in a global bidding war for essential resources they, and we need. Long gone is the day when the Standard Oil Company only needed to deliver King Saud a new Cadillac every year to assure rights to his kingdom’s oil supplies, even though it often had to be towed by teams of camels, as there was then no refining capacity yet on the peninsula. Decades later I was part of a swat team at Morgan Stanley who made sure the crude kept flowing and the cash surpluses recycled. Having grown up in the desert near Indio, California, I was the only one in the company who actually liked caravanning out into the desert to scoop up cooked rice with my fingers and guzzle illicit Johnny Walker Red, said to be smuggled in by a wayward member of the royal family. I never did get used to the sheep brains, though. But I digress. To the current generation of oil traders I might as well be talking about the Pax Romana than the Pax Americana, which is now equally ancient history. The hard truth is that they are out there bidding against the new 800 pound gorilla in the market, as are others for coal, iron ore, copper, gold, silver, wheat, corn, soybeans, and myriad other essentials. If you have any doubts about China’s acquisitive determination, look at the chart below showing that the Middle Kingdom’s outbound direct investment is about to outstrip inbound investment for the first time. For you and I, this means we can count on the price of everything to go up in the future, a lot. Keep food, commodity, and energy ETF’s permanently on your radar, like the PowerShares agricultural (DBA), the Rogers International Commodities (RJI), and the Oil Trust (USO). Jim Rogers, are you listening?

Oct 19 11:45 AM