Photo: Library of Congress
Some good observations on the commodity boom from Mike O’Rourke of BTIG:The Continuous Commodity Index added 3.74% for the week. Gold hit another all time high Thursday, but its moves were tame relative to the Grains. Corn rallied 13.4% for the week, Wheat was up 10% and Soybeans added 7.6% as the result of a second consecutive monthly reduction in the crop estimates by the Department of Agriculture (where’s Beeks when you need him). In addition, Crude is starting to show signs of life with its first string of closes north of $80 since early August. Considering all of these developments are occurring in an environment where participants are expecting a new round of quantitative easing in less than a month, the inflation talk is heating up in the trading community. As of yet, we would describe the Grain moves as fundamental with a QE kicker. Besides the vast excess capacity in the economy, another reason we would keep the inflation fears on the backburner is the CRB index. It has only now just exceeded its 2010 peak and has significant upside resistance from 2006-2007, slightly higher than current levels. The difference between the CCI and the CRB is the CRB has significant energy weightings and intends to weight the commodities based upon their influence in the economy. It is still 37% off its peak and only now is poised to move above its 200 day moving average for the first time since September 2008. Needless to say, any momentum in the Energy sector could certainly juice the index higher, but a sustained move would be reliant upon an improved economic recovery.