So the minutes from the FOMC meeting were released and the markets took a few minutes to decide what to do, except what they always do when the Fed speaks, trash gold. Risk was back on as U.S. Treasuries futures were sold like they were radioactive, finally breaking down below the 140 bottom to settle below $139 at 138.89.
This sent the stock markets through the proverbial roof, commodity prices up and gold down $30.
So, let’s start with oil. Brent crude futures for April delivery were up to $126.23 per barrel, up $0.89, while West Texas Intermediate Futures edged higher by $0.37 to close at $106.71 on the Globex. RBOB Gasoline prices continue to push higher and closed for April delivery at $3.363 per gallon and showing absolutely zero signs of slowing down.
There was some bottom feeding and short covering in both the U.S. natural gas and coffee markets. Natural gas saw some short-covering which brought the price back up over $2.30 per million BTUs to $2.324. Coffee is trying to carve out a bottom in the $1.80 to $1.85 region but a close over $1.8570 tonight may stabilize the market for the next few days and set off a short-covering rally to $1.92 or so.
Gold was sold along with U.S. treasuries, hitting a low of $1663 before the Chinese layered buy orders kicked in, as Bernanke spoke of the U.S. economy somehow muddling through with $4.00 per gallon gasoline this summer. The retail sales numbers were released this morning and fully 66% of the rise was due to gasoline sales (on much lower volumes) and auto sales (also on much lower volumes) to dealers, i.e. channel stuffing by Government Motors.
But the Fed doesn’t think inflation from oil prices will be long-lived. This means, of course, that they will have to print more money at some point. The only thing saving us from a torrent of liquidity at this point, other than the half-torrent we have now, is that high oil prices stemming from this half-torrent is keeping the CPI higher than it should be. Isn’t circular reasoning grand?
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