Investors are racing to sure up possible losses against inflation brought on by devalued currencies. Several central banking firms globally have lowered interest rates in an effort to expand purchasing power, and stimulate the economy. Investors use this process to back their more risky and developed investments. when a lowered interest rate is imposed by a government banking regulatory system it weakens the nations currency. The US dollar is leading all other currencies in this decline. "The weaker dollar gives commodities priced in the currency a boost, as traders can buy them at a relatively low price".
The ramifications of this moving to a lower interest rate, globally, has caused trading in commodities to explode. Traders looking for the best return and safest investment have begun to expand their hard assets. What this means for the energy industry is a sharp rise in prices for energy commodities. The energy industry is essentially a commodity industry because most business facets of the industry are involved in utilities. Utilities have always been a safe bet as far as investment futures are concerned, and this new occurrence has led to increased growth of energy commodities such as, oil and natural gas.
With the current economic turmoil and mistrust an investors best bet would be to expand into growing hard assets. Although, physical assets have always been a conservative bet by investors and seen as not innovative the fact remains they are most likely the safest market to investors. The commodities market is the safest market to enter and our industry has a major stake in its fluctuations.
- Timothy D. Vallario
Source: Wednesday, October 6, 2010 - VOL. CCLVI NO. 82 , "Investors Stock Up on Hard Assets" by Brian Baskin. (Commodities Section, Pg. C13)
This is a very interesting blog/article. I understand how and why commodity prices are increasing. I wonder if this will reflect in the every day lives of the consumers. For example, does this mean the price of gas will go up? This also goes along with my article because California requires one third of these utilities produced to be renewable sources of energy. It will be interesting to see if the increasing price of energy commodities affects California in a different way because they have this requirement.
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