Commodities remain high on geopolitical concerns

The final trading session of this second week of intense world events opened on a mixed note in various assets once again. Global investors continue to digest the fast-moving news stories and are still attempting to keep one step ahead of volatility and counterintuitive market moves that are clearly very much news-driven as opposed to heeding internal fundamentals.

Thus, crude oil prices hovered near the mid- $105 area for yet another morning, gold traded some $3 higher at the open (following a somewhat unsettling and swift pullback from a new record very near $1,450 on Thursday) and silver edged higher as well (last seen near $37.38 per ounce). Platinum and palladium slipped a tad lower in early trading as the players in that complex weigh the impact on the events in Japan, and to some extent Libya, on the auto industry.

Reports that automotive-related layoffs could take place in Indiana, and that European carmakers might have to idle certain plants as parts shortages are turning serious are keeping a lid on the platinum-group metals even as their yellow and white relatives are scoring record-book achievements. Quotes of $1,748 and $749 respectively were on offer for the two noble metals in the first hour of Friday trading.

Overnight reports that China’s central bank might be bullish on commodities (and gold in particular) stoked the bulls to some extent, but they appeared to ignore the context within which the 125-page PBOC report made any such statements and how the institution might actually view the future of some of these markets.

For the sake of…balance, we note that while the PBOC did forecast that: "Developed countries will continue with their loose policies and global liquidity will remain ample, which will keep prices of commodities, especially crude oil and grains at high levels," and that “concerns about inflation would trigger demand for gold as a store of value,” it also raised caution flags about the fact that the precious metal's bull run may be near its end: "We need to note that gold prices have reached historical highs, and its downward risks should not be overlooked," the central bank said. With the recent readings of bullish consensus being what they are in some of these metals, there appears to be quite a bit of “overlooking” going on by latecomers to the gambling table.

This morning’s world news roundup contained much of the same dramatic story material that has kept markets on edge and investors on alert for the past two weeks now. Japan and Libya remained at the front and center of media attention while markets added resurfacing European debt concerns and broader economic snapshot data to the list of items on their watch-list as the week began to wind down. Safe-haven bids in precious metals, oil and certain currencies continued to be visible as this most upheaval-laden March also draws towards a close.

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