Dramatic interest rate cuts this morning of .75% by the Fed has caused commodity prices to explode higher today, led by gold. Gold has risen exponentially by $45/oz. in just 8 hours! That may be a record rise in such a short period of time!
Even oil trades more than $3.00 higher per barrel, although it remains well off its most recent highs, due to recessionary demand concerns.
Grains, including soybeans, wheat, and corn, all hit their lock limit down prices today, but are now surging to higher prices in reaction to the plummeting US Dollar. The second chart here shows wheat rebounding to the previous days' settlement price after touching its lock limit down price. Soybeans and corn have similar charts.
The US Dollar is plunging, after rising steadily in recent days and weeks. See chart #3 for the USD price plunge since the Fed rate cut.
Inflation is being fueled significantly by this rate cut. Commodity prices should remain well-supported by falling interest rates and inflation risk, and a even weaker US Dollar. The ECB's reiteration of its hawkish stance will further reinforce the strength of global currencies, and the weakness of the Dollar. This will provide price support for grains and other commodity prices.
Tuesday, January 22, 2008
Gold explodes $45! Commodities follow on inflation fears!
