Weakness in U.S. Dollar Continues to Support Commodities

Weakness in the dollar continued to support commodities. Although several US data released last week beat expectations, speculations that the Fed will expand the bond buying program did not abate. The dollar index plunged for a 3rd week to 78.08, down -1.65% on the week.

The energy complex was the best performer of the week with crude oil and fuel prices surging 6-7%. Precious metals strengthened further with gold making new nominal highs and silver 30 year highs. Base metals continued to perform well as strong Chinese PMI signaled demand for the complex should sustain.

Central bank meetings will be the focus next week. Driven by robust economic data and hawkish speeches from policymakers, the RBA is expected to raise the policy rate by 25 bps on Tuesday. The ECB and the BOE will be meeting on Thursday. We believe both central banks will leave monetary policies unchanged.

Let's look at the charts for nominal returns in energy, precious metals and base metals.

The "Super Cycle" in Gold and How It Will Affect Your Pocketbook in 2010

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Oil Drops After Data Shows U.S. Recession Worse Than Estimated

Crude oil fell, heading for its first monthly decline since January, after revisions to U.S. data showed the economy shrank more than estimated in the recession. Oil is set for its first weekly decline in three weeks after a surprise 5.15 million barrel jump in U.S. crude inventories was reported by the Energy Department. Japan, the world’s third largest oil consumer, said crude imports plunged for a ninth consecutive month in June. “The low $70s has become the ceiling for oil prices, as at this point they begin to weigh on equity markets,” Christopher Bellew, senior broker at Bache Commodities Ltd. in London.....Complete Story

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