GBR Market Wrap, April 22, 2011
In this Week’s Issue
• The U.S. dollar index closed the week at 74 its lowest level since August 2008 (AP)
• Spot gold rose to a new high of $1,512, its sixth consecutive week of gains (Reuters)
• Spot silver hit $46.69 an ounce, gaining 8.4% this week (Reuters)
• BP files Billion Dollar lawsuits on one-year anniversary of Gulf oil disaster (AP)
• Brazil raises benchmark interest rate by 25 basis points, from 11.75 to 12% (FT)
• Thailand lifted interest rates for the sixth time in less than a year (Bloomberg)
• Sweden’s central bank raised its key repo rate by 25 basis points to 1.75% (Reuters)
• India’s headline inflation leapt to nearly 9%, compared with 8.3% in February (Economist)
• Standard & Poor’s cuts long-term outlook for U.S. debt from stable to negative (AP)
• U.S. housing starts were 549,000, up 7.2% from February but down 13.4% from Mar-10 (ESA)
• Euro area annual inflation was 2.7% in March 2011, up from 2.4% in February (Eurostat)
• University of Texas endowment holds $1Bn gold, 5% of its portfolio (Forbes)
Gold and silver prices have been on the run no doubt. But other commodity prices have seen an increase as well and the pace of that increase has been accelerating too. The Reuters/Jeffries CRB Index, a broad commodity index, is up over 36% in the past 6 months. While not everyone agrees that easy money policies by the Fed were the catalyst for an increase in asset prices, Michael McDonough does just that. In a recent Seeking Alpha article, he maintains:
“Commodity prices show a strong correlation with large-scale asset purchases, evidence that contradicts Federal Reserve Bank of San Francisco research published earlier this week that indicated quantitative easing has not caused commodity price increases.”
Granted that correlation is “not” causation, the chart below is a rather tempting example of coming to that conclusion.
Please consider: Shutdown Deal Is Flimflam and Swindle by David Stockman. You’re in for a nice piece of straight talk. Enjoy!
Good luck and good investing!
Clemens Kownatzki, MBA is an adjunct professor of financial risk management at the Graziadio School of Business and Management, as well as the founder and CEO of FX Investment Strategies, a Registered Investment Advisor. In addition to running his investment advisory firm, he is a contributing author at SeekingAlpha.com and BusinessInsider.com. He also publishes the popular investment blog www.fxinvestmentstrategies.com along with a weekly news-letter.