Crude prices rebounded following US equity market rallies. An economic recovery would justify higher crude prices but ultimately rests upon the health of financial institutions. As such, equity rallies are questionable given that many banks remain in an indeterminate state.
[U][B]
Commodities - Energy[/B][/U]
[B]Crude Rebounds On US Market Rally, Fundamentals Point In Favor Of Lower Prices[/B]
[B]Crude Oil (WTI) $48.920 +$0.410 +0.85%[/B]
Crude prices rebounded following US equity market rallies. An economic recovery would justify higher crude prices but ultimately rests upon the health of financial institutions. As such, equity rallies are questionable given that many banks remain in an indeterminate state. While the US Treasurer Timothy Geithner stated today that he belives most banks are well capitalized and will not need further assistance, many continue to be exposed to large holdings of mortgage and credit card related securities. These holdings will likely suffer as a result of the steepened recession and lead to larger losses. Even if able to survive further writedowns, these losses will limit their ability to lend and could strongly hamper a recovery. As a result of this possibility, equity markets could return to bearish sentiment, risk appetite will diminish, and crude traders will return focus to supply and demand fundamentals that point strongly toward lower prices. As crude demand remains at decade low levels and stock piles continue to float above 25-year highs, the case for lower prices is very strong. Nevertheless, market sentiment remains heavily influential on crude prices and any further equity rallies will continue to provide some support for current prices. That being said, as focus returns to these core fundamentals, prices should decline further in the near to medium-term.
[U][B]Commodities - Metals[/B][/U]
[B]Possible Losses For Financials Place Safe-Havens In Position To Gain[/B]
[B]Gold $883.900 -$3.600 -0.41%[/B]
Gold showed modest declines today as US markets rebounded somewhat. However, yesterday’s bearish statements from Bank of America underline the precarious position that banks continue to remain in. Now that earnings are beginning to pour in, large exposures to mortgage and other asset-backed securities will take center focus for investors. Negative expectations for further losses in these securities could pull back investor risk appetite to the benefit of gold. Expect modest price gains in the short-term.
[B]Silver $12.010 -$0.095 -0.78%[/B]
Silver prices followed gold. Silver will gain with safe-havens but the metal is used in a number of industrial applications. As a result of declining production this may distort some price action. Nevertheless, silver is still in position to gain modestly as a safe-haven metal. Expect modest price gains in the short-term.