Commodity Update: Inflation, Falling Bond Yields and a Pipeline Hack
Gold opened the week on a high note after last week’s big run-up, opening the week right at last week’s close @ $1831 per oz. Like the rest of the market, this week prices have been all over the place up and down and back up again, and Gold has followed a similar volatile pattern. The pattern, up at the beginning of the week, down hard on Wednesday due to the much higher than expected inflation numbers, to test support and back up on Thursday and Friday to end the week on a positive note, trading in late Friday trading at $1,441 for an overall weekly gain. The week’s late push on Thursday and Friday, bounced right off of support at $1410 right back up to the last 2 week’s high around $1441. This resistance level is important and if it breaks higher due to falling US bond yields and a lower U.S dollar, the price could retest the $1900 levels not seen since the first of the year. The negative correlation between gold and the U.S dollar is going to be important to watch over the next few months.
Silver has as usual followed a similar pattern to Gold, but with more muted movements and ranges up and down. The week opened at $27.40 and ranged up to a high of $27.87 and down to a mid week low of $26.72 before hitting support and finding plenty of buyers willing to come in at that level and pushing the price higher. With the price recovering in the last couple of days, close to the open of the week at $27.40 for an overall flat week, even with all the volatility. Commodities investors like equity investors this week have been feeling a bit “whipsawed” back and forth. The overall economic recovery with stimulus money pushing inflation, unemployment numbers increasing slightly and bond yields dropping are all contributing to the increased uncertainty and volatility.
Oil this week has been huge in the news due the Colonial Pipeline computer hack that has impacted the gas supply along the eastern seaboard all the way up to New Jersey. One would naturally think that gas prices would move much higher, but while prices have moved higher as supplies have been spotty, the worst of the shutdown seems to be over and the prices fell back sharply on Thursday as the announcement that the pipeline was again operational caused prices to drop back to a low of $63.12 well below the week’s open at $64.83. This again is due more to demand issues in the economy than supply issues due to the short term pipeline disruption. However price spiked higher on Friday as the reality of the huge drawdown in supply became apparent and the likelihood of the association disruption could carry well into next week pushed the prices back above $65 per barrel for an overall slight weekly rise in price. Prices would have gone much higher is the supply crisis had gone on longer, but as it appears on Friday, the worst of the crisis is mostly over.
Bill Poulos is a retired automotive executive, investor, and a financial educator. Bill began his interest in the markets in the 70s, while advancing his way through General Motors. After retiring in 2001, Poulos co-founded Profits Run with his son Greg. A financial education firm, Profits Run’s main goal is showing everyday people tips for trading safely and smartly, including key risk management. Profits Run is located in Michigan, where Bill lives with his wife, Karen of more than 50 years. Bill refined many programs for Profits Run including Crypto Profit Alert, Instant Options Income, Premium Income Alert, 20/30 Wealth Trader, Real Wealth Alert, Earnings Profit Alert, Premium Income Letter, Rapid Income Engine, Forex Profit Accelerator 2.0, Profits Run Coaching, and Profits Run Alliance. To keep up with Profits Run, follow Bill on Medium and on LinkedIn.