WTI crude oil went below $93 a barrel yesterday and Brent crude oil dropped to $110 a barrel. In early February, WTI crude was trading above $110 a barrel, so the price has dropped an astonishing 15% in the last 3 months or so.
Gold is trading at $1536, compared with $1612 at the beginning of 2012. So much for the safe haven!
Commodities in general have been hit by the strengthening of the US dollar as fears of eurozone contagion spread, as well as worries about global demand if growth weakens. The US dollar tends to strengthen if risk averson increases, and the price of commodities is inversely proportional as they are denominated the currency.
It looks like the Greeks will formally announce fresh elections in early to mid June after failing to form a coalition government. The Greek people will be finally forced to decide whether they want to accept austerity or leave the euro. Hollande and Merkel may sweeten the deal for pro-Euro Greeks by perhaps softening the terms of the bail out terms in the short term to avoid the chaos triggered by a chaotic default on its debt obligations. The Greek politicians are hoping that the fear of contagion in the eurozone to countries like Spain and Portugal will make Germany consider its options carefully before the “nuclear” option.
Futures are weak again, so its going to be poor day. FTSE futures are down 50 points or so.
Contrarian Investor UK