A new trend is emerging in global markets, where the last 5 years saw the rise in commodity prices, at the same period we saw the weakness of the US Dollar with the slow-down of the worlds biggest economy America. In terms of economic cycles this has been the hardest swing of boom to bust as deep down across every cross section of US society, the bust has had a deep impact on the US and the entire global economy. With the credit bust of 2008 came the reduction of the US interest rate and massive budget deficits to re-ignite the economy. As a firm believer in Laissez-faire economic theory myself, i do not contend that the massive government intervention in the banking market, and subsequently insurance and industry did the US economy much good at all because Keynesian budget deficits in the short run to do not alter the cycles of economic growth. if not then why has it take 6 years to day still and the US Fed has interest rates at virtual zero? Laissez-faire, or non-intervention of the markets calls for minimal government interference to allow economies to seek equilibrium naturally. but then this is another argument i will relate in a deeper essay. so back to our short discourse. The dollar fell and now it is set to rise after 6 years of torturous economic malaise. Expect the US Dollar index to smash thru the 100 barrier in 2015 as the US economy becomes the darling of the world. Forget China!
The inverse relationship between commodities and the US dollar looks set to sustain itself for even greater Dollar heights for 2015.
As the US economy clears itself with the credit hangover and the US economy once again becomes the juggernaut for global economic growth, increasing expectation of dollar rate increases will fuel the surge of the Dollar Index thru the 98 barrier after the brief lull it is set to experience the next 2 months with profit taking.
US Dollar Index
88.117 and dealers searching for an Almighty reason to negate the waning interest in the USD before the Xmas season and anticipated lull and profit taking to flat out and square the books for the year. Very little large block option trading as dealer interest shifting to the coming festivities.
Crude Oil
The Long march down from the dizzying heights of 149 is set to prolong right thru 2015 with a sustainable 40-50 dollar sideways trend as market reaches price equilibrium.
in a classic illustration of the demand and supply curve. Oil raced to 149 when demand outstripped supply and then as prices sustained at the top end, this called for new investment in production, particularly the North American shale Gas revolution. the last 3 years of increasing output caught up with demand and then surpassed demand. thus now we are seeing the full effects of shift in equilibrium with supply today extended over and above demand.
Crude Oil 55.12
all the weakest longs in the last bull run have been cleared out and 2015 should see economic sense establishing a new equilibrium trend for the next 3 years to come in the 40-50 range 2015 and 50-60 range 2016, provided the US economy does not stutter into shock as the first rate increase in years commences.
Gold
Downward watch - support at 1186.
Moving downwards in value in inverse relation to the USD, Gold is inching lower and lower on its decline having failed to break through the key resistance area at 1236. Now we have to watch out for the key the support at 1186.
There is strong resistance at 1217 (intraday high). Further down there is more support at 1170 (intraday low) and 1143. All in all the long-term, any move below the strong support area at 1181 (28/06/2013 low) is going to strengthen the belief that the underlying trend is a strong downward trend and that is going to open up the way for further decline towards the strong support area at 1027 (28/10/2009 low).
Pieter Bergli - DeLoren Trust Holdings
Free liberal knowledge for all on markets.
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