It’s a beginning of a new week dear readers and the start seems bright for the yellow metal. After plunging below the $900 per ounce level last week we see gold trying to regain some strength and stabilize up top. Supported by the rally in crude prices to hit another record high, the appeal for the metal as an alternative investment and a hedge against inflation caused the shiny metal to gain as much as $7.60 per ounce as prices added 0.9 percent to trade currently around the $893.00 per ounce level.
Pretty much all that is needed now is a little kick from oil because personally, I believe gold is in for a big surprise! The past records witnessed in the commodities markets might not be possible any time soon as speculations that the end of the credit woes has come near.
But the spur in crude prices to hit a new record high of $119.93 per barrel earlier this morning was not supported by a weakened dollar and the fact that investors switched to commodities! Supply worries caught up with investors causing them to hurry and buy more contracts after U.K. had to shutdown a major North Sea pipeline which supplies 40 percent of its oil and gas. Where we once thought the rally in crude prices was almost over, here we witness it once again as the contract gained more than $3 per barrel since Friday.
Last week the Federal currency was triumphant against majors as we saw it climb higher dragging all the pairs from the record highs they were nearing. Despite the low confidence in the US, data concerning the labor market with the release of company earnings gave investors that little thing left in them to believe that the credit crisis might be over as it had peaked and is on its way to the downside.
The series of aggressive rate cuts might come to end but with one more to go on Wednesday, who knows whether it will be the last one or not? Expectations are for a 25 basis point cut and markets have already priced it in! This is the moment where gold and all dollar backed commodities are waiting for…If the Feds stop slashing rates, then the dollar will soon emerge again but if not…we’re back to square one! Hold on tight as this week might just surprise us!