Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21
Last Chance to GET FREE Money Crypto Mining with Your Desktop PC - 2nd May 21
Will Powell Lull Gold Bulls to Sweet Sleep? - 2nd May 21
Stock Market Enough Consolidation Already! - 2nd May 21
Inflation or Deflation? (Not a silly question…) - 2nd May 21
What Are The Requirements For Applying For A Payday Loan Online? - 2nd May 21
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part1 - 1st May 21
INDIA COVID APOCALYPSE - 1st May 21
Are Technicals Pointing to New Gold Price Rally? - 1st May 21
US Dollar Index: Subtle Changes, Remarkable Outcomes - 1st May 21
Stock Market Correction Time Window - 30th Apr 21
Stock Market "Fastest Jump Since 2007": How Leveraged Investors are Courting "Doom" - 30th Apr 21
Three Reasons Why Waiting for "Cheaper Silver" Doesn't Make Cents - 30th Apr 21
Want To Invest In US Real Estate Market But Don’t Have The Down Payment? - 30th Apr 21
King Zuckerberg Tech Companies to Set up their own Governments! - 29th Apr 21
Silver Price Enters Acceleration Phase - 29th Apr 21
Financial Stocks Sector Appears Ready To Run Higher - 29th Apr 21
Stock Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues - 29th Apr 21
Get Ready for the Fourth U.S. Central Bank - 29th Apr 21
Gold Mining Stock: Were Upswings Just an Exhausting Sprint? - 29th Apr 21
AI Tech Stocks Lead the Bull Market Charge - 28th Apr 21
AMD Ryzen Overclocking Guide - 5900x, 5950x, 5600x PPT, TDC, EDC, How to Best Settings Beyond PBO - 28th Apr 21
Stocks Bear Market / Crash Indicator - 28th Apr 21
No Upsetting the Apple Cart in Stocks or Gold - 28th Apr 21
Is The Covaids Insanity Actually Getting Worse? - 28th Apr 21
Dogecoin to the Moon! The Signs are Everywhere, but few will Heed them - 28th Apr 21
SPX Indicators Flashing Stock Market Caution - 28th Apr 21
Gold Prices – Don’t Get Too Excited - 28th Apr 21
6 Challenges Contract Managers Face When Handling Contractual Agreements - 28th Apr 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Crude Oil Sets New High Above $139; Gold Surges as Dollar Dives

Commodities / Crude Oil Jun 07, 2008 - 06:00 PM GMT

By: Jason_Simpkins

Commodities

Best Financial Markets Analysis ArticleCrude oil for July delivery traded at an all-time high of $139.12 a barrel on the New York Mercantile Exchange today (Friday), after the U.S. dollar nosedived on speculation that the European Central Bank would raise its key lending rate and on worries that a bigger-than-expected spike in unemployment meant the U.S. economy was far weaker than feared.

For the day, July crude oil soared $10.75, or 8.4%, to close at an all-time high of $138.54. For the week, the contract climbed 8.8% on the NYMEX.


The still-weak greenback today fell more than 1% to $1.5674 per in late-afternoon trading - its lowest point since May 28 - after employment data from the U.S. government detailed a bigger-than-expected 0.5% decline in non-farm payrolls.

U.S. stocks were pounded. The Dow Jones Industrial Average plunged 394.64 points - or 3.13% - to close at 12,209.81. The tech-laden Nasdaq Composite Index skidded 75.38 points, or 2.96%, to end the day at 2,474.56. And the broader Standard & Poor's 500 Index plummeted 43.37 points, or 3.09%, to finish the week at 1,360.68.

Troubling Trends

The U.S. payroll numbers really spooked investors. The unemployment rate jumped to a higher-than-expected 5.5% in May, up from 5% in April, as employers put 49,000 Americans out of work.

Employers have now cut payrolls for five straight months, leaving the jobless rate at its highest level since October 2004. The 0.5% rise was biggest monthly jump since 1986. The total number of unemployed has reached about 8.5 million people, up from 6.9 million a year ago when the unemployment rate was 4.5%, the Bureau of Labor Statistics reported.

The unemployment rate is expected to reach at least 6% by early next year.

The dollar's decline Friday followed an equally dramatic tumble Thursday, when the greenback fell 1% on news that the European Central Bank (ECB) hinted at an increase in the European Union's main financing rate.

"It is not excluded that, after having carefully examined the situation, that we could decide to move our rates a small amount in our next meeting in order to secure the solid anchoring of inflation expectations," ECB President Jean-Claude Trichet said at a news conference.

The ECB has remained hawkish on inflation, holding its key lending rate steady, even as the U.S. Federal Reserve cut its benchmark Federal Funds rate seven times in a desperate bid to revive the U.S. financial-services sector while also averting a recession.

Between Sept. 4 and April 22, the dollar plummeted 14% against its European counterpart as a result of the divergence, and the $1.6019 it  reached on April 22 was an all-time low.

The Greenback "Head Fake"

After reaching that nadir, the greenback posted a slight 3% rebound, hitting a five-week high on May 2 after Fed Chairman Ben S. Bernanke signaled a pause in the U.S. central bank's rate reductions.

In a May 8 financial commentary, however, Money Morning Investment Director Keith Fitz-Gerald warned investors that the dollar rally was " a head fake of legendary proportions ."

Recent events have derailed the greenback's rally - and validated Fitz-Gerald's warning.

Friday's employment figures compounded the negative effect of Trichet's comments by fueling speculation that the U.S. Federal Reserve would be unable to reverse course and start raising rates as most analysts have been predicting without pulling the rug out from under the U.S. economy. Should the ECB raise its rate in July, the results could be devastating for the dollar, which could slip into an out-of-control spiral.

"The big shock was the rise in the unemployment number," Samarjit Shankar, a foreign exchange analyst at The Bank of New York Mellon ( BK ), told Bloomberg . "It damps the outlook for a tightening in U.S. rates and strengthens the case for $1.60 [against the euro]."

Oil and Gold Soar

Commodities, priced in dollars, soared on the greenback's freshly exposed vulnerability.

"Many investors used the latest sell-off in the dollar as an excise to get back into the [oil] market," Andrey Kryuchenkov, an analyst at Sucden (U.K.) Ltd. told Bloomberg . "Concerns that demand is flattening in the near term have been overshadowed by persistent inflationary worries."

Crude oil for July delivery jumped $5.49 a barrel, or 4.5%, Thursday before extending its gain to a record high above $137 Friday.

Money Morning 's Fitz-Gerald - one of the first investment gurus to predict triple-digit oil prices - recently boosted his target price for crude oil from the $187 level he projected back in December to a new level of $225 a barrel .

Gold climbed 2.7%, returning to the $900 an ounce mark as the dollar stumbled.   

" Gold rallied in line with moves down in the dollar. "  David Thurtell, analyst at BNP Paribas SA (OTC: BNPQY ) told Reuters .  "The worry is if unemployment is climbing, then mortgage defaults and subprime losses rise."

Money Morning today (Friday) published a research report reiterating its earlier prediction that gold prices could reach $1,500  - or even $2,000 - an ounce, thanks to the powerful global trends that are forcing many commodity prices to new record highs.

Gold is traditionally used as a hedge against financial uncertainty. It also makes commodities priced in the U.S. currency cheaper for holders of other currencies.

[ Editor's Note : Check out Money Morning on Monday for an analysis of the gold market by noted global-investing expert Peter D. Schiff - a regular Money Morning contributor - and for an investment story detailing profit plays in both the oil and gold sectors.]

News and Related Story Links:

By Jason Simpkins
Associate Editor

Money Morning/The Money Map Report

©2008 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Jason Simpkins Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in