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.

1 comment:

  1. It was a awe-informative post and it has a significant meaning and thanks for sharing the information.Would love to read your next post too......
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