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Cooling hot commodities may be trouble for stocks
Fed Chief Ben Bernanke must be pleased as punch that this is likely to be his last spring at the helm of the Federal Reserve. That’s because for five years now, an auspicious start to the new year has turned ugly by the time the cherry blossoms bloom along DC’s Tidal Basin.
Don’t be fooled by the headline-grabbing rally in stocks. Although the Dow and S&P 500 have been on a well-publicized tear, more disquieting signals are being flashed in the commodities markets around the globe — with everything from gold to silver to oil down more than double digits in percentage terms so far this year.
The carnage in the gold market was especially acute, with the yellow metal having its worst day in more than 30 years on Monday.
Why does it matter? While a swoon in gold hit billionaire gold bugs like John Paulson and David Einhorn particularly hard last week, investors who ignore swings that happen only once in a generation do so at their peril.
Gold and commodities weakness is “signaling concerns about global growth,” Mohamed El-Erian, co-chief investment officer of PIMCO, told Reuters last week. “Commodities have been sending the signal on growth for a while, and now even louder,” he said.
So what gives? China, for one. Its gross domestic product came in with a reading of 7.7 percent in the first quarter — not bad, but the country’s worst showing of the 21st century. The sub-par growth on the part of the Chinese, plus the mess in Europe, triggered valid concerns that Bernanke is losing the battle against deflation.
Read More: http://www.stockgoldmarket.com/cooling-hot-commodities-may-be-trouble-for-stocks
