Oil Spikes Higher To Over $100!
This morning’s CPI reports showed that last quarter’s inflation was contained and as expected, yet that news helped propel oil prices to over $100. The chart below shows the price spike that occurred at exactly those announcements at 8:30AM EST.
Why would that happen? The answer is that inflation, particularly in commodites is coming. The Fed’s easy money policy and cheap interest rates are hurting consumers and this game of investing in tangible assets to get away form the Dollar in risk averse scenarios is starting to gain traction.
Under “normal” conditions, oil would sell-off as part of the risk aversion trade and the fact that there would be less demand for oil should economies begin to contract. Well that scenario seems likely at this point, especially with what is taking place in the Euro zone and yet oil soars.
The market is using the red herring of problems in Iran but at the end of the day its Bernanke and the Fed.
Thanks a lot, Ben.