Quote:
Originally Posted by Panda  Quote:
Originally Posted by lannarebirth Quote:
Originally Posted by Panda The $US has been gaining strength against all the major currencies over the past 3 weeks. At the same time, food and oil have dropped in value.
There seems to be a correlation? Didn't the price of oil start to rocket up about the same time the $US went on a slide around a year ago? Exchange Rates Graph (American Dollar, British Pound) | It started going up (strongly) when the general public started investing in commodities as if it were a true asset class. their contributions were small enough that rolling over their futures positions made them still more money as markets were in backwardation. Now that they've gone contango and the price is falling the hot money is staring to disperse. It's pretty obvious if you follow the money and you do't get attached to your own idea of "what must be happening". | "backwardation" and "contango" ? |
Despite the ideologies on display here claiming to know why commodities have been rising, there is only one reason they rise, and that is because someone throws more money at the market. The last few years "investment funds" have and involved themselves in commodity markets, not because they have any particular interest in commodities, but because by buying the futures and rolling out the contracts each month, they can by themselves move the market higher. Heretofore a condition called "backwardation" existed, WHEREBY FUTURE MONTHS CONTRACTS WERE PRICED CHEAPER THAN FRONT MONTH CONTRACTS AND THESE FUNDS MADE ADDITIONAL MONIES ON THE "ROLL". nOW A CONDITION KNOWN AS "CONTANGO" EXISTS AND EACH TIME THEY ROLL OUT THE CONTRACT THEY LOSE MONEY AS FUTURE MONTHS ARE PRICED HIGHER and they're receiving a negative roll yield. It's alwayys about the money and never about the ideology, although many people can intellectualize the ideology easier it is usuall wrong.
ooh, sorry about the caps