After a lull performance during the final three months of 2012, signs of recovery in the US economy have finally emerged. In addition to improved job data, - 198,000 jobs added by private employers in February - factory data also improved with demand for a range of factory goods picking up.
These findings of the ADP National Employment Report earlier this week reflect that the worlds largest national economy is picking up, and the recessionary forces may be gradually withdrawing. What could this mean for commodities and forex markets?
For one, commodities such as gold and oil will see some turnaround in how prices have been behaving for the past few months and years.
Everyone knows of the phenomenal bull-run witnessed as far as investment in gold is concerned. Lately, however, the metals safe haven appeal had been receding. With improved US data and signs of recovery, the metal will likely take a backseat as far as investors preferences are concerned. After all, whod be tempted by the safe haven appeal when economic recovery gives the most reassurance that tough times will get better.
"Gold traded little changed on Thursday, unable to break above a key resistance at $1,585 an ounce, as data showing signs of improvement in the US job market bolstered hopes for growth and weighed on safe-haven demand," began an article in the Reuters on Thursday.
Similarly, oil pundits will be writing off predictions of a possible rise in prices. As the superpower economy rises up, fuel demand will also increase, and so will oil prices. After all, the US is the worlds largest oil consumer.
In the forex market, its time for the US dollar to rally having stayed in the ebb for long. On exchange rate website FXStreet.com, bullish headings such as "Sell everything, buy the USD" prevail. Besides, any further cracks in EUs economic landscape or slowdown in the Chinese economy would mean investors will flock to the USD, especially since the economy has started to show signs of improvement.
As to how sustainable these signs will be remains to be seen in the coming months. But if trends of improvement will stay, commodity and forex markets better brace up for a cyclical change in how commodities have performed. The recessionary impact may have lasted too long, but a recovery is welcome, even a slow and gradual one.
Comments
Comments are closed for this article.