Strong gold & crude oil thrust CRB index high

01 Mar '08

3 min read

NY futures continued their ascent this week, with May rallying 437 points to close at 79.33 cents and December gaining 383 points to close at 84.77 cents.

The relentless surge of the commodity complex continued this week, as the CRB index raced to a new record high of 413.45, up 4.2 percent on the week and up around 35 percent year-on-year. The charge was led by gold and crude oil, which advanced to 970 dollars and 102 dollars a barrel, respectively. But one would be hard pressed to find any commodity that was down this week and Ag commodities in particular seem to enjoy a lot of favor among investors and speculators, with December corn closing at a record 5.59 dollars a bushel, while November soybeans rallied to 14.17 dollars a bushel today, just slightly shy of their record of 14.26 dollars a bushel.

The wheat market had its most volatile week ever, as its daily range exceeded 20 percent yesterday with volatility readings of around 50 percent. May wheat in Chicago closed at 11.97 dollars a bushel today after posting a record high close of 12.45 dollars yesterday, while December wheat ended the day at 10.83 dollars a bushel.

The wheat market is particularly interesting because it serves as a case study for the current disconnect that exists between the cash and the futures markets and it highlights the dangers that loom for the cotton market. The influx of speculative money has led to a massive short squeeze of commercial hedgers, which were eventually forced out of their short positions over the last few months and are now either unable or unwilling to take on new shorts.

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