GOLDILOCKS FOR GOLD

Gold - As Fed chairman Bernanke tried to convince Congress that interest rates can stay low for an extended period of time, bond yields eased significantly as money traders worked out that they can now play the curve once again through lending long and borrowing short, picking up the yield differential.
 
At the same time, Mr. Bernanke's observation that there's so much slack across labor and capital assets that it would be a long time before inflation would pick up helped soothe investors' concerns. These calming words helped send the dollar gently lower over the two days of his testimony. 

With investors running out of yield opportunities amid the promise of little if any return on money, the creeping buying gold has become more evident. Midweek the most active August contract rose to $952.40 bringing its year-to-date gain almost 8% as the desire to find a store of value holds its line of argument.
 
No one knows with any certainty that the fiscal and monetary conditions will or will not generate soaring price rises. Nor do they know whether the policies will be successful at staving off a deeper economic recession led by continued declines for residential and commercial real estate. Such events would naturally be extremely negative factors for consumption, employment and incomes, which is precisely why investors are looking for alternatives to paper or fiat currencies.
 
With no sign of inflationary pressures building Mr. Bernanke has time on his side, but that's working against the dollar for now. The more the dollar does this the faster will be gold's ascent. We recommended gold futures in both last and this week's issues of Jurojin Weekly and we're hoping for a quick hop to $963 per ounce this week for our readers.
 
In the bigger picture a revisit to $1,000 is once again likely. The gold bugs seem to have everything just about right for now.
 
Orange Juice - ICE juice futures didn't enjoy the same positive day as gold despite the decline in the fortunes of the dollar. A downward revision from six to five for the number of active hurricanes that will form this season by WSI Corp., a weather forecaster, might have had something to do with prices falling the most in two weeks. Just last week the futures price per pound had risen to $1.04 for a 50% rally throughout 2009.
 
But investors are sensing that it's not just a weak dollar that will boost this market. While that event is usually bullish for commodity prices, on this occasion a stronger dollar is seen as a symptom of weaker economic growth. Right now the fear is for precisely that as more economists line up to predict a double-dip recession ahead. Without economic growth, juice prices won't be heading north. Throw in the fact that the lower perceived threat from hurricane formation is an effective add to supply and suddenly you have a bear market looming.
 
Energy - The world is still swimming in oil apparently and crude oil prices eased just a little on Wednesday after a government report showed a slightly smaller decline in inventories than was forecast. The Energy Department reported a 1.8 million barrel decline rather than the 2.2 million barrel drop that the market was waiting for. The 342.7 million inventory of crude oil is 7.3% above the five-year average. The September future closed down at $65.38. Still traders looked to Tuesday's American Petroleum Institute data, which showed an increase in stockpiles and so noted that the DoE data was actually slightly less bearish.
 
U.S. daily fuel demand was an average 18.6 million barrels over the past four weeks and is 4.8% lower than this time in 2008. Wednesday's report showed gasoline supplies added 813,000 barrels to 215.4 million last week for a sixth consecutive gain.

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