Did Goldman start beginning of end of commodity rally?

Inflation borne from rising commodity costs could be affecting the continued rise of those commodity prices. An announcement from Goldman Sachs that it will divest itself from commodities and reap the profits had investors charging in a herd toward the commodities exits. Demand has started to erode under pressure from rising prices and speculators are cashing in, which exacerbates the slide. Source of article – Will Goldman-triggered commodity rout lower U.S. gas prices? by MoneyBlogNewz.

What Goldman predicts

By the end of the day on Monday, April 11, there was an end to the advancement of commodity costs after they rose 25 percent just since December. Japan’s economic minister gave a warning that the economy would end up worse than predicted after the March 11 earthquake and tsunami while Goldman Sachs warned that there would be a decrease in commodity costs which started a commodity rout. Oil fell more than 7 percent and copper ended Tuesday with its largest one-day loss since February. There might be “demand destruction” from the high costs on oil which may end up staying long even though oil and gasoline are close to the Spring 2008 amounts, states Goldman. Most who were betting on fear and risk causing an increase in oil costs have stopped since there may be a cease-fire in Libya and peaceful elections in Nigeria.

Back to realistic commodity prices

Some analysts think Goldman triggered the commodities rout in order to cash in and position itself for a more profitable entry point into a longer term upward trend. Goldman’s comments happened, however they were not the only thing. There has been lots of pressure on the prices for commodities. High oil costs could threaten the growth of the economy according to a report on Tuesday from the International Energy Agency. On Monday the International Monetary Fund projected that inflation borne by high commodity costs would slow global economic growth from 5 percent last year to 4.5 percent in 2011 and 2012. Dow Theory Letters publisher Richard Russell said on Tuesday that the Federal Reserve’s quantitative easing program is ending which markets may be preparing for. With the $600 billion the Feds bought in Treasury Securities, there has been a lot of cheap cash. This makes for more costly commodities.

Prices impacted by United States consumers too

Goldman Sachs aside, there is another that makes a difference to the oil prices in the United States This is the customer in the U.S. There was a report released on Monday by MasterCard. It stated that there was a fifth week of decrease in gasoline sales. Before the decline, demand increased for two months and analysts expected the trend to continue as the economic recovery gathered steam. But the average gasoline price in the U.S. is already 41 cents higher than the same period in 2008, when the average gas price peaked at $4.11 in July. This time last year, price was down 80 cents a gallon. MasterCard stated that last week there were 2.7 billion gallons of gasoline sold, which is 3.6 percent lower than last year at this time. A survey was done by the Oil Price Information Service in March. It showed that of all gas station chains, there was a 70 percent decrease in service. More than 50 percent reported a decline of 3 percent or more.

Citations

Barrons

finance.yahoo.com/banking-budgeting/article/112536/commodities-selloff-possible-correction-barrons?mod=bb-budgeting&sec=topStories&pos=7&asset=&ccode=

Reuters

reuters.com/article/2011/04/12/markets-metals-idUSLDE73B0WS20110412

The Street

thestreet.com/story/11080240/2/goldman-calls-commodities-top-is-now-the-time-to-sell.html

Delcotimes.com

delcotimes.com/articles/2011/04/11/news/doc4da2fdeae7538694359346.txt?viewmode=fullstory