Tuesday, February 9, 2010

Macro and Micro affects on Commodity prices.

It is difficult to find something not made in China and it is also hard to not hear the word China in the news. The Commodity markets have been an interesting story over the last few days, and the China influence lingers. Although last week saw a significant pull back in commodity prices, especially in Gold and Crude oil, support levels seem to be holding.
A micro reason is the significant snow fall throughout many parts of the U.S. A macro reason is an international debt crisis stemming from the countries known in the E.U. as the PIIGS. Portugal, Ireland , Italy, Greece, and Spain. Greece, and it's bad debt, has been the subject of a bailout by the E.U. and saving it from potetionally defaulting. This has given the commodity markets, and the equity markets an aura of stabilization and providing a rally in stocks, dragging the commodities along with them.
Ok, so where does China come in ? China has been significantly tightening policy and the prediction among experts is that China will continue to put the Kibosh on lending. This has caused a temporary boom in lending within the last few weeks as loans get rushed through.
By tightening policy they share the view that commodity prices will continue to rise without some type of action by their central bank.

Saturday, January 30, 2010


Is it a coincidence that my first blog is on the same day that China announces it's angry with the U.S.A. for supplying arms to Taiwan? I do not know if I believe in coincidences, but I do believe in the importance of commodities in a world wound up as tight as a Father before his first daughter's wedding. This year of 2010, the year every person hopes to be better than 2009, will emerge as the year of the commodity. Currency devaluation is now a world wide epidemic that has come out of hiding in the past few months. Like a turtle sticking its head out, the currency devaluation began with U.S. dollar then retreated and then came all the way out in the falling of the Euro currency. "It's not just the U.S.A. that's screwed" is a comment I often hear in the trading pits as we watch the currencies fluctuate. This currency issue converging with an intense international climate will escalade commodity prices regardless of economic downturns.