West Texas Intermediate oil fell below $50 a barrel and gold traded near a five-year
low after a selloff that has pushed commodities to the lowest level in 13
years.
The greenback was sharply higher against the euro, while Spanish and Italian bonds climbed.
The outlook for precious metals and oil prices has been undermined as the strengthening of the U.S. economy pushes the Federal Reserve toward lifting interest rates for the first time since 2006. The Reserve Bank of Australia said weaker commodity prices probably dragged on first-quarter growth as the country’s currency remained too strong.
WTI dropped 0.4 percent to $49.97 a barrel by
7:14 a.m. in London, while gold futures retreated 0.6 percent for a
ninth straight day.
The dollar held near a three-month high against
the euro with EUR/USD last trading at 1.0826, up 0.01%.
The yen touched its weakest in a month with USD/JPY last trading at 124.38 higher 0.09%.
The yield on
10-year notes from Spain and Italy gave up at least two basis points.
The MSCI Asia Pacific Index edged higher, while U.S. and European stock futures were little changed.
Peter Sorrentino, a Cincinnati-based fund manager at Huntington Asset Advisors Inc. also said the dollar has been harmful for commodities. “The implications there for the hard-asset part of the global economy is pretty abysmal looking out to the rest of the year.”
“Commodities are going to face a lot of headwinds,” said Fross &
Fross Wealth Management President Thomas Fross in an interview with Bloomberg.
“Gold is a really big insurance policy against a declining dollar and a declining economy, and we’re not looking at either of those. As the Fed raises interest rates we think it’s going to force more people out of fixed income and into the equity market.”
Analyst at Kitco News meanwhile shed some light on the news from China. News that the government of China’s gold holdings were lower than anticipated upon that country’s first real reporting of the metal’s status since 2009, inspired some to believe that, in fact, China wasn’t driving the gold market nearly as much as first thought, said Gary Wagner.
The news triggered other holders of the yellow precious metal –
institutions and individuals alike – to shed some of their gold
stockpiles. They reckoned that if the government wasn’t keeping its
holdings on a huge scale, they shouldn’t either.
