Commodities

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  • The price of gold soared in Q1, but a bumpy road lies ahead.

    Gold Soared, but Why?

    Not so long ago, gold suffered the most challenging losses since 1999.  According to conventional wisdom, US rate hikes will contribute to its further decline. If that’s the case, why did gold prices soar during the last quarter?

    At the turn of 2015, gold was driven by the broad commodity sell-off, especially the drastic plunge of oil prices that was fueled by the stronger dollar, along with concerns over China’s growth deceleration. Yet, the reality is that gold has low correlations with commodities and other asset classes.

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  • Oil is strongly correlated with the CRB Index.

    Where Oil Goes, So Goes the CRB Index

    This Great Graphic, created on Bloomberg, depicts the CRB Index, a basket of commodity prices.  The technical picture has deteriorated, and the price action in the coming sessions is particularly important in determining outlook. 

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  • Technical indicators paint a mixed picture for gold.

    Technical Indicators Muddy Golden Waters

    During a period in which the zero bound no longer is the floor of interest rates, and many central banks continue to ease policy, we have been watching gold a bit closer. 

    In early January, we noted that the technical pattern warned of breakout.  Our first objective was $1110-$1135.

    In early February, we updated our view with gold trading near $1150. The charts still looked constructive; we suggested a new target near $1200. 

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  • Gold continues to bounce along a trough, but there is hope.

    The Barbarous Relic

    Keynes and others may have referred to gold as a barbarous relic, but many investors continue to track it.  In early January, we warned that gold appeared to be breaking out of a short-term bottoming pattern.

    It had taken out a three-month downtrend line, which we suggested was part of a triangle pattern.  Gold also traced out a double bottom pattern.  The triangle pattern pointed to a move toward $1110 and the double bottom projected to around $1135.  The yellow metal poked through $1157 today and remains near it highs in late turnover.

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  • Low commodity prices could derail Latin America's economic stability.

    Latin America's Smooth Economic Ride Jeopardized by Commodity Crisis

    Much of Latin America has seen an unusually long period of relative political stability since the early 2000s. With the exception of Cuba, democratically elected governments seem embedded throughout the region. The political rules of the game largely seem to be followed. Indeed, the international outcry following the 2009 coup that removed Honduras' president, Manuel Zelaya, served to reinforce how much Latin American politics had changed since the 1970s, when military dictatorships were the dominant form of government.

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