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Credit Crisis Burst's the Commodities Bubble

News_Letter / Credit Crisis 2008 Mar 24, 2008 - 03:42 AM GMT

By: Nadeem_Walayat

News_Letter

The Commodities bubble burst this week sending gold sharply lower to $908 from above $1020 earlier in the week (11%). The fall in the silver price was even more dramatic - down to $17 from above $21 (20%).

The declines have been attributed to global deleveraging but frankly mark ups of 20%+ in most commodity markets in recent months had pushed the commodities markets into overbought states that require a retracement. However, deleveraging is real.


The Market Oracle Newsletter
March 23rd, 2008            Issue #10 Vol. 2

Credit Crisis Burst's the Commodities Bubble


Dear Subscriber,

The Commodities bubble burst this week sending gold sharply lower to $908 from above $1020 earlier in the week (11%). The fall in the silver price was even more dramatic - down to $17 from above $21 (20%).

The declines have been attributed to global deleveraging but frankly mark ups of 20%+ in most commodity markets in recent months had pushed the commodities markets into overbought states that require a retracement. However, deleveraging is real.

The expectation is for gold to continue to trend lower towards support at $850, where it should find support and rally again towards $1000, its behaviour at that point will determine the next major trend.

The week also saw hedge funds attempt to bring down Britain's biggest mortgage bank, the Halifax (HBOS), the consequences of which could have triggered panic throughout the already jittery markets. The growing panic was halted when the Bank of England in an unprecedented move issued statements denying the rumours of the Halifax having sought emergency funding. A fuming FSA launched an investigation into those responsible for the false rumours and short selling that could have triggered a cascade of failures.

The Halifax saga illustrates just how fragile the current investment climate has become with extreme volatility and uncertainty presenting both huge opportunities but also great risks.

In that light, our friends at Elliott Wave International have made available for FREE to our readership their Most Important Investment Report of 2008 - The Year Everything Changes.

This FREE report includes forecasts for the year ahead and how to best position your portfolio as the financial dominos keep falling one after another.

Yours watching the deleveraging downward spiral analyst.

Nadeem Walayat,
Editor of The Market Oracle

In This Issue
  1. Words from the Investment Wise for the Week that Was (23rd March)- Part 1
  2. The US Fed Engineered Commodities Price Plunge
  3. Gold Trading has Changed Due to Impact of Gold ETF Holdings
  4. HUI Gold Stocks Bull Market Hit by Seasonal Selling
  5. Stocks Bear Market- How Bad Can It Get?
  6. DELEVERAGING- Gold and Commodities Teetering on the Brink of a Bear Market?
  7. Bear Stearns Fire-sale Sends Global Markets and US Dollar Plunging
  8. Financial System Crisis Met by Wall of Central Bank Money Leading to Hyperinflation
  9. US Fed Panic Measures to Avert Financial Meltdown on Bear Stearns Failure
  10. UK Mortgage and Commercial Banks Decimated by Bear Stearns Bust
1. Words from the Investment Wise for the Week that Was (23rd March)- Part 1

By: Prieur_du_Plessis

Phew – what a tumultuous week! Once again, the fall-out of the subprime mess had a lot to do with it. For some variety, however, it was not only financial's that were in the limelight, but also commodities that corrected sharply.

Read Article

2. The US Fed Engineered Commodities Price Plunge

By: Alex_Wallenwein

The world-wide fiat system functions like a roach motel: Investors check in - but they NEVER check out! By it's latest hit on commodities, the Fed as the system-leader gave investors a shot across the bow. The message: "If you try to leave, we will hurt you!"

("Leaving the fiat system" here means to store your wealth in more tangible forms that are not as susceptible to engineered currency collapses.)

Read Article

3. Gold Trading has Changed Due to Impact of Gold ETF Holdings

By: John_Handbury

The introduction of Gold Exchange Traded Funds (GETFs) has changed the fundamental supply and demand dynamics of the gold market. Now goldbugs, rather than crudely storing gold in their basements, can buy shares in companies that actually store the physical gold bars in secure warehouses.

Read Article

4. HUI Gold Stocks Bull Market Hit by Seasonal Selling

By: Zeal_LLC

After an incredibly volatile week for the precious metals, PM-stock traders are very worried. Despite Bernanke's Fed forcing real interest rates even more massively negative , gold plunged. The PM-stock traders, never paragons of courage anyway, panicked. The HUI gold-stock index plummeted with gold.

Read Article

5. Stocks Bear Market- How Bad Can It Get?

By: Hans_Wagner

To beat the market you need to invest with the trend. The stock market is down and continues to fall almost every day. As of March 19, 2008 the DJIA is down 8.8% for the year, the NASDAQ is down 16.7%, the S&P 500 is down 11.6% and the Russell 2000 is down 13.3%. Most investors are looking at their portfolios and they are very unhappy. The initial problems with the mortgage market started this tumble. Will it continue to get worse and is it spilling over into other parts of the U.S. economy? So how bad can it get?

Read Article

6. DELEVERAGING- Gold and Commodities Teetering on the Brink of a Bear Market?

By: Nadeem_Walayat

Gold and other commodities plunged below key short-term support levels following Tuesdays US Interest rate cut to 2.25%. The consensus seems to see this as a healthy correction or is this a signal for a potential end of the commodities bull market?

Read Article

7. Bear Stearns Fire-sale Sends Global Markets and US Dollar Plunging

By: Mike_Whitney

“It's a snowball and it keeps getting bigger,” Peggy Furusaka, credit specialist at BNP Paribas SA in Tokyo.

Last night, while America slept, investors and dollar-holders around the world held an impromptu election on US stewardship of the global economy. It was a spontaneous referendum triggered by the sudden collapse of Bear Stearns, but it covered many of the issues that have worried investors for the last seven years:

Read Article

8. Financial System Crisis Met by Wall of Central Bank Money Leading to Hyperinflation

By: Ty_Andros

BEWARE: The Ides of March, aka FIRESTORM! Part II
As confidence in US financial institutions and its balance sheets DISSAPEARS so have the investors in them. Liquidity from the private sector has stopped dead in its tracks. As I have outlined in the past, there is no lack of liquidity, only a lack of confidence to deploy as questions of Solvency are now of primary importance.

Read Article

9. US Fed Panic Measures to Avert Financial Meltdown on Bear Stearns Failure

By: Money_and_Markets

Martin D. Weiss writes: Last night, when Ben Bernanke cut the discount rate ... made a loan of $30 billion to cement the Bear Stearns buy-out ... and flung open the Fed's coffers to the next major investment banks that may be on the brink of failure ... he must have thought that investors around the world would applaud his actions.

Read Article

10. UK Mortgage and Commercial Banks Decimated by Bear Stearns Bust

By: Nadeem_Walayat

Panic selling of the financial sector gripped the stock market today following news of the bailout of Bear Stearns over the weekend. The FTSE ended the day down over 200 points. The banks hit the hardest were the mortgage banks followed closely by those with large mortgage backed bonds and derivatives exposure as the deleveraging of the $500 trillion market continues. The Bank of England stepped in to provide emergency lending of £5 billion which was oversubscribed by more than 5 times, and indication of the desperate state of the UK banks.

Read Article

 

For more indepth analysis on the financial markets make sure to visit the Market Oracle on a regular basis.

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