Saturday, 18 April 2009

Markets this week 14-17 April

Another short week, in that Easter Monday reduced the available time for trading on either side of the Atlantic. No major changes in any of the measures I follow, details below:
FTSE: 4092.8 (up 109.09 or 2.74%)
DOW: 8131.33 (up 47.95 or 0.59%)
£: $1.4797 (up 1.36¢ or 0.93%)
£: €1.1345 (up 2.17¢ or 1.95%)
Oil: $53.3 (down 76¢), £36.02 (down 85p) or €40.87 (down 16¢) per barrel of Brent Crude
Gold: $870.5 (down $9.50), £588.29 (down £11.94) or €667.42 (down 54¢) per Troy oz.

Below is a graph showing trends in the value of oil and gold. The methodology for my indexing is as follows:
(1) The weekend price of each commodity is calculated in each currency by dividing the dollar price by the appropriate exchange rate.
(2) These commodity prices are then indexed, such that the mean value over the recorded period is 100.
(3) The weekly value for each commodity is calculated by a simple average of the three index values for that week (the value for $, £ and €).

Two main points to note:
1) From December through to February, the gold price was consistently rising, whilst the oil price was much more volatile, with a slight upward trend interrupted by big falls. This reflected a general lack of confidence in the world economy, and in the currencies, too.
2) The highest value gold achieved was in the same week as a trough for oil. This correlation is more than mere coincidence. The timing doesn't coincide with any *particular* announcement (it happened before the G20 summit, for instance) but Obama's mortgage bailout plan was annouced the following week, and one of the UK's bank support schemes was also announced around that time. Neither seems to have "turning point" power to it, so perhaps I'm forgetting something. Nonetheless, ever since, oil has been rising and gold falling - both sure signs of confidence increasing.
Thoughts on the week: no news is good news.
Google hits count: "because of the credit crunch" scores 237,000 whilst "despite the credit crunch" manages 305,000. Take that, pessimism.

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