Sunday, October 24, 2010

North American markets up as gold falls 3.4%

North American stock markets recorded their third consecutive weekly gain. For the week, the Dow and the S&P 500 were both up 0.6 percent. Markets were roiled on Monday after China's decision to raise interest rates by 0.25%. The move was aimed to steady the country's inflation rate. North American markets were also in a passive stance on Friday ahead of the G20 summit in South Korea.

 Cotton soars

The price of cotton continued to soared this week, after US production was threatened by weather conditions. On Friday, December cotton futures rose 3.5% to close at US$1.1971/pound. For the week, cotton was up 9%.

Cotton price reached a 140-year high on October 15th, after hitting US$1.198/pound. Cotton's upward movement in recent weeks has been due to production cuts due to floods in China and Pakistan.

Gold falls 3.4%

The price of gold fell 3.4% this week to settle at US$1325.1/ounce, its biggest fall since early July. This was partly because China's interest rate hike has sent the US dollar up 0.7% this week. Gold hit a record of $1,387.1/ounce the week before, but have since fallen partly due to concerns that US quantitative easing (QE2) has been fully priced into the market.

The week ahead

Markets will likely focus on announcements from the G20 summit and the continued earnings season next week. In addition, investors will also be looking ahead to the Federal Reserve meeting on November 2nd and 3rd. The recent fall in the US dollar has analysts believing that the market has priced in US$1 trillion of quantitative easing (QE2). Thus, an announcement by Ben Bernanke for less than that amount could send markets lower. In fact, a report from the Wall Street Journal this week showed that the Fed may conduct QE2 over a period of months and in tranches, and not in one large amount.

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