Oil and gold starred last week, with support from the sinking US dollar and the rising involvement of investors such as hedge funds and big global investors chasing higher returns than in stocks.
Oil futures recorded their biggest monthly gain since 1999, thanks mostly to the surge in monetary demand led investors (but apparently not consumers) to punt on a surge in oil prices.
This was accentuated by the fall in the value of the US currency.
July crude oil futures ended up $US1.23 at $US66.31 a barrel in New York, the highest settlement price for a front-month contract since early last November, when prices were tumbling in the aftermath of the Lehman Brothers collapse.
In May, oil futures soared 30%, the biggest monthly gain since March 1999.
The Reuters/ Jefferies CRB Index rose 1.3% to 253.05 on Friday for a gain of 14% for May, the biggest monthly jump since July 1974.
Silver futures posted their biggest monthly gain in 22 years, while gold futures rose to a three-month high.
India’s economy expanded at a faster-than-expected pace of 5.8% in the quarter ended March 31 from the first quarter of 2008.
But we also learned that first quarter growth in Malaysia contracted by 4.4%, the Philippines by 2.3%, and Thailand by 1.9%.
In Japan, industrial production rose by 5.2% in April from a month earlier. But inflation fell and is now negative, unemployment rose to a five year high and looks like going higher.
All this isn’t a sign of high consuming economies increasing their appetites for raw materials such as oil, copper and other metals.
Gold rose above $US980 an ounce on Friday to end near a three-month high.
Some analysts claimed this resulted from the growing appetite for risk flushing investors out of the dollar and into bullion and other commodities.
But two months ago the same analysts were arguing that gold would rise because of the huge government debt plans, and big deficits would cause future inflation.
Now it’s the growing appetite for risk; next it will be the growing prospect of inflation following the economic rebound (ignoring that the US, Europe, UK and Japanese economies are hovering on the edge of a burst of deflation and the Chinese economy is in the throes of a nasty bout of falling prices).
Gold prices climbed more than $US20 last week.
Of course it was none of the above: merely the simple arbitrage of buy gold and then sell the US dollar using money that costs you next to nothing. Money for jam.
Comex August gold futures settled up $US17.10 at $US980.30 in New York on Friday.
Silver futures gained 3% Friday, ending May at $US15.61 an ounce on Comex.
Silver rose 26.6% this month, the biggest rise since April 1987. Gold rose 9.8%. Platinum rose 4.2% on Friday.
In other metals Friday, July copper gained 6.05c, or 2.8%, to $US2.1975 a pound. Copper rose 7% in May.
It’s up more than 70% so far in 2009.
