Inflation, the dollar, gold and more …

There’s a lot happening in the markets from inflation, to the dollar, gold and more …

— Record Oil: On Monday, oil hit a new intraday high of almost $140 a barrel even as Saudi Arabia announced it planned to boost production by as much as 500,000 barrels a day. While initially prices eased on the news, it was offset by …

— A weaking U.S. dollar: The dollar’s recent bounce is already losing steam, having shed a full 1% of its value in the last two trading days.

— Surging Inflation: Yesterday morning Washington announced that wholesale prices for May jumped 1.4% — that’s the equivalent of a 16.8% annualized rate of inflation at the wholesale level!

— Gold continues to flucuate: The yellow metal remains in a wide trading range, swinging between $850 and $930 and ounce. But it’s getting ready to ultimately break out to the upside, and run to well over 1,000 an ounce.

— Food prices are skyrocketing: Corn just hit a record high near $8 a bushel. Soybean prices are up almost 13% in two weeks! And if you think this is a direct result of the unfortunate floods in the Midwest, think again. Food prices were soaring well before the floods in Iowa, and they will continue to rise, driven higher primarily by growing demand.

Here’s my perspective: 

#1: Listen to the news, but take it with a grain of salt. The environment we have right now in natural resources is prone to rumor and innuendo. But rumor and innuendo never change major trends. In fact, news does NOT dictate the major trends in any market; but rather, news flows from the trends!

#2: Don’t worry about government authorities stepping in to squash commodity prices: Any government regulation of commodity markets will backfire, by increasing the cost of doing business for commodity producers and suppliers … by negatively impacting liquidity … and by sending speculators overseas to trade. It’s called the “law of unintended consequences” and the government is an expert at it! Taking the wrong steps at the wrong time!

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