Market Views

Commodities Overview

Currencies Overview

Late last week’s sharp decline in commodities prices may lead to increased buying interest this week. While a round of profit-taking had been expected to hit prices, especially if prices were not able to break above key resistance levels, prices sold off Friday for a reason that does not support such a downward move. Thus, prices may be expected to spring back this week, as investors reverse last Friday’s selling. Prices will have to hold above key support levels to attract investor fund, but that should not be a problem. Prices for gold, silver, and oil had been trending higher over the past several weeks, prior to the sell-off late last week. Last week’s bout of profit-taking also coincided with a strengthening U.S. dollar, further weighing on commodities. While buying interest may be sparked this week, the market remains vulnerable to another sell-off. Fundamentals continue to support prices for gold, silver, and oil. There has been increased optimism in financial markets related to the global economic outlook. An economic recovery is increasing demand for silver from fabricators while demand for oil is rising from consumers and industrial users.

After a volatile ride last week, the U.S. dollar could begin to consolidate against the major currencies, including the euro, pound, and yen. Economic recovery is spreading around the world, but Europe and Japan are experiencing more difficulties than perhaps had been expected. The United States economy, on the other hand, has been recovering at a better and faster pace compared to the economies in Europe and Japan. Many investors have been moving monies out of Japan and Europe and reinvesting in U.S. dollar denominated assets. Leading macroeconomic indicators for the United States over the past several months have pointed to an economic expansion, although concerns remain. Consumer confidence, industrial production, economic growth measured as gross domestic product, and credit conditions have improved. Unemployment, however, remains high, capacity utilization remains low, and lending has been mixed. All of these are lagging factors, hwoever, so their weakness does not necessarily suggest weakness or absence of economic recovery. Meanwhile there has been increased speculation over a possible revaluation of the yuan. On Friday 16 April President Hu Jintao of China commented that the country would eventually adopt a floating exchange rate system. China may revalue the yuan, but the timing and revaluation methodology are not clear.