Will Goldman-triggered commodity rout lower U.S. gas costs?

When it comes to commodity prices, what goes up, must come down. As Goldman Sachs revealed that it was selling off commodities holdings to harvest the spoils of the rally, the rest of the industry followed. As commodity costs have soared, something had to give and in this case it is customer demand, which as it falls, is sending commodity prices down in turn. Resource for this article – Will Goldman-triggered commodity rout lower U.S. gas prices? by MoneyBlogNewz.

How the future will look according to Goldman

After rising 25 percent since December and setting fresh peaks Monday, April 11, commodity prices halted their advance by the end of the day. There started to be a commodity rout after warnings on commodity price decreases from Goldman Sachs. There was also a warning from Japan’s economic minister that there would be more damage than believed from the earthquake and tsunami on March 11. Tuesday, there was the largest drop in copper in on day since February while there was a 7 percent decrease in oil. Goldman explained that oil and gas are around the Spring 2008 levels currently. The concern is that there could be long lasting “demand destruction” on oil due to the high costs. There were really peaceful elections in Nigeria while the chances of Libya figuring everything out seem possible right now. This means those betting on fear of these events are no longer going to stopping the oil price increases.

Back to realistic commodity prices

Many are worried that Goldman started the commodities rout so that it could get in on the upward trend that is occurring and prepare. However, in addition to the oracle of Goldman, many recent headlines have pressured commodity costs. High oil costs could threaten the growth of the economy according to a report on Tuesday from the International Energy Agency. The International Monetary Fund talked about it on Monday. It said that commodity costs would trigger a decrease in economic growth to 4.5 percent in 2011 and 2012 from the 5 percent it was last year. In his daily remarks to subscribers Tuesday, Richard Russell, publisher of the Dow Theory Letters, said that the markets could be preparing for the end of the Federal Reserve’s quantitative easing program. The Feds purchase of $600 billion in Treasury securities has flooded the markets with cheap cash used by speculators to drive up commodity prices.

Prices impacted by U.S. customers too

The U.S. customer makes a huge difference to commodity prices, with Goldman Sachs in the background. A MasterCard report released Monday showed that gasoline sales declined for the fifth consecutive week. For a couple of months, there was an increase in demand, before it stopped. This decline was not expected. The average price of gas in July was $4.11. Right now, the price is already 41 cents higher than it was in that same 2008 period. MasterCard reported sales of 2.7 billion gallons of gasoline last week, down 3.6 percent from the same period last year, when it the price was 80 cents lower. A March survey by the Oil Price Information Service showed that sales had fallen at 70 percent of United States gas station chains. Over half reported a big decline. This is defined as a decline of at least 3 percent.

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