Monday, April 10, 2006

Possible Recessionary Market Indicators?

Oil prices are at a 7-month high

Oil prices held steady in Asian electronic trading Tuesday after hitting a seven-month high in New York the previous day amid concerns that Iran's nuclear standoff and violence in Nigeria could undermine supplies.Light, sweet crude for May delivery rose 1 cent to US$68.75 a barrel on the New York Mercantile Exchange, midmorning in Singapore.

Chief among the oil-market fears these days are Iran's nuclear standoff with the international community and violence in Nigeria that has forced the shutdown of more than half a million barrels a day of supply. Both Iran and Nigeria are members of OPEC.Another source of concern is that more than 300,000 barrels per day of Gulf of Mexico production remains off the market as a result of last summer's hurricanes.

Gasoline prices up 17 cents a gallon in the last 2 weeks

NEW YORK ( - American drivers are being socked with skyrocketing gasoline prices and could even see shortages this summer as refineries struggle to switch additives that make cleaner burning fuel.

Nationwide, average gas prices shot up another cent and a half Monday to $2.676 for a gallon of regular, according to a survey by AAA. A year ago the average was $2.272.
The jump adds to a trend seen over the last month or so.

Over the last two weeks gasoline prices have surged 17 cents per gallon, said Trilby Lundberg, publisher of the Lundberg Survey, which tallied prices March 24 and April 7 for its latest survey released Sunday.

Dollar was up—Fed may raise rates more than initially anticipated

April 10 (Bloomberg) -- The dollar advanced for a third day against the yen on anticipation the Federal Reserve may increase borrowing costs twice more this year as the economy strengthens.

Traders have been increasing bets the Fed will raise its main rate to as high as 5.25 percent since a government report on April 7 showed the economy added more jobs than economists forecast. Yields on 10-year U.S. Treasuries near four-year highs may also attract demand from international investors.

Gold Speeds through $600—a 25 year high

SINGAPORE (Reuters) - Gold spiked to $600.40 an ounce on Tuesday, its highest since December 1980, as funds bought on worries about inflation, Middle East tensions and uncertainties over the dollar's outlook.

Silver tracked gold's gains and rose to another 23-year high before retreating, while platinum paused for breath after hitting a record high the previous day.

"We're there mate, we've done it," said Darren Heathcote, head of trading at N M Rothschild in Sydney.

Tensions in the Middle East over Iran's nuclear intentions, uncertainty about the dollar's outlook, worries about rising energy costs and speculation that central banks will diversify into metals have also boosted gold's appeal

Silver also climbs to new 23 year high

Gold prices rose to 25-year highs in Asia, as investors bought the metal to hedge against inflation. Silver climbed to a 23-year high and copper rose to a record in Shanghai.

Reports the U.S. is planning military strikes against Iran, the world's fourth-biggest oil producer, pushed up energy prices and boosted the appeal of safe haven assets.

Investment funds are also pouring money into commodities such as copper, used to make wires and pipes, betting their returns will beat those on stocks and bonds.

``There's a heightened level of funds coming into the metals in the second quarter,'' said Mark Pervan, head of research at Daiwa Securities SMBC in Melbourne. ``The higher oil prices also bode well for'' precious metals.

Central banks are rumored to be buying gold

The upward march in commodity prices picked up even further pace overnight as a combination of geopolitical tensions over Iran, supply concerns, fund diversification and sheer momentum drove prices higher across precious, base metal and oil markets.

Alongside the geopolitical concerns are worries about the US dollar at a time of mounting imbalances in the world economy. Central banks are rumored to be buying gold as a hedge against a collapse in the greenback, while momentum-chasing funds are jumping on the bandwagon.


Something is up in the world and the markets are talking. I believe we will soon see a rapidly slowing economy as higher energy prices and interest rates begin to hurt the already overextended consumer, while simultaneously US housing inventories swell causing home prices to fall--taking away the wealth effect and US consumer spending (70% of our economy).

It's probably a good time to get ready for the looming recession--right around the next corner... IMHO, I believe it'll be a monster this time.


Anonymous said...

Though some of the reports are alittle contradictary, ( strengthing economy hence higher instrest rates against central banks buying gold) I would largely agree that all the events together add further evidence of a major economic event is approaching.

JasonSpalding said...

The Iranian President Mahmoud Ahmadinejad said “I declare here that the laboratory-scale nuclear fuel cycle has been completed and young scientists produced enriched uranium”. What was his definition of laboratory-scale? Laboratory scale characterization, small scale and pilot scale test method development.

Anonymous said...

Time to accumulate more gold and silver the next time the lows are tested.

mtnrunner2 said...

What's the best stuff to own during the recession? I agree it will be big, but was just a teen during the last recession and not paying attention to what markets fared well. Google searches on "recession" yield very little.

contrarian2day said...

Thanks to all for posting up. Just got off work, and only now do I have the time to reply.

Anon--The "strengthening economy" issue is based on skewed gvt statistics and the addition of many new service sector, Wal-mart-type jobs.

The dollar is strengthening (in demand) due to the Higher rates paid by the US vs the world marketplace (only way we can get buyers and the main reason we'll continue to see higher rates in the future). While saying this, many foreign central banks are becoming increasingly leery with holding so many fiat assets (dollars)from a government that can't balance their budget and continue to run ever increasing deficits. They know the writing is on the wall and feel GOLD will be an excellent hedge.

JASON--I understand your point. Many are taking an extreme view of the current situation. Doesn't really matter. The gvt and media are playing it up to the max and we'll be dropping bombs soon enough.

TOM--Could not possibly agree more.

MtnRunner--See above said... integrates how much homes SOLD for in your area as well as nationwide using the google mapping technology. If you don't see data for your area simply email with your zipcode and or address and they'll update the site and email you within a few days.

Any Mouse said...

I would guess another October Crash for the markets as in 06. Lets do hope for another PM Dip, time to but another round or two.