A Week of Milestones

``Commodities, says Say, are ultimately paid for not by money, but by other commodities. Money is merely the commonly used medium of exchange; it plays only an intermediary role. What the seller wants ultimately to receive in exchange for the commodities sold is other commodities.”- Ludwig von Mises, from Lord Keynes and Say's Law, The Critics of Keynesian Economics, edited by Henry Hazlitt, University Press of America 1983

Figure 4: stockcharts.com: Milestone Highs in Commodities!

Last week was a week of milestones.

One, crude oil crossed the all important psychological threshold of $100 barrel (lowest pane), two, gold is only a breath away from another landmark $1,000 and copper nears its all time high at $3.95 a lb.

The CRB index too a composite featuring a basket of different commodities likewise is on a record run (pane below main window) as shown in Figure 4.

Of course, all this comes in the light of a US dollar index that has etched a lifetime low.

Meanwhile, Gold priced in the US dollar index (main window) - meaning against the Euro, Japanese yen, the Canadian Dollar, the British Pound, Swedish Krona and the Swiss Franc-which means not only has gold risen to a milestone high in US dollars terms but likewise against a basket of currencies represented by the US dollar index.

Of course, the burst of activities maybe interrupted by interim corrections.

Again others say that the next wave of credit derivatives implosion will sink these lofty gainers. This maybe true in the equities market but we aren’t convinced with regards to commodities. Others also say that inflation is a lagging indicator and would eventually fall as credit driven woes escalate. As we have noted before, monetary policies will have divergent impact to different countries. In addition, yes while demand maybe impacted by a slowdown but what of supplies?

Besides, as collective government attempts to socialize losses and increase interventions in the marketplace in the challenge to stabilize prices, we are likely to see even more distortions, more liquidity generation and more currency debasement activities—or your “moralistic” inflationary activities.

Figure 5: Comex Gold to the Philippine Mining Index: A clue of Future Prices?

In figure 5 we see the US comex gold shares take a spike, whereas local mining issues have not responded similarly. Is the COMEX gold sending us a signal of the prospective direction of our domestic Mining issues?

As a reminder, not all mining issues are cut from the same cloth.