Commodities Bounce Higher After Bernanke Announcement

Brittney Barrett  |

Commodities rose broadly on Friday alongside the larger market. The highly anticipated Jackson Hole announcement from Federal Reserve Chairman, Ben Bernanke prompted enthusiasm among investors. Bernanke said he anticipated long-term economic improvement, but admitted that it requires near-term assistance.

Bernanke revealed few details of the measures being considered to promote economic growth but said that the Fed would meet for two days in September for a more exhaustive discussion on the matter.

Among other issues, he cited the need for Congress to endorse hiring and growth. Bernanke pointed at the current failure to do so as one of the challenges facing the current economic recovery.

Bernanke’s words were interpreted optimistically by investors, who helped prop commodities up from earlier losses. Both oil and gold had been vacillating in recent trading but Bernanke’s announcement helped to reverse that trajectory.

The enthusiasm was surprising given the lack of details in the speech and the day’s earlier disappointment, when the government lowered the annual growth pace down 0.3 percent to 1 percent.  Analysts had not been optimistic going into Bernanke’s speech though, anticipating the Fed Chairman would reiterate its earlier intent to maintain near zero interest rates through mid-2013 and do little else.

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The reason for the rise in commodities may be investors attempting to redistribute their portfolios to include such essentials as gas and groceries in the event other consumer goods stutter.

Shares of the major energy companies benefited from the higher price of crude oil today. Exxon Mobil (XOM) made gains in line with the broader market, which was up around 1 percent today. Chevron Corp. (CVX) and Conoco Phillips (COP) had similar gains for the day on high volume.

Among oil and gas stocks Marathon Oil Corporation (MRO) was the largest by-percentage gainer, but is still more than 50 percent beneath 52-week highs.

The slowing economic growth may have been a hindrance on oil and gas companies in spite of the rising price of commodities today. A slower economy will lessen the amount of oil and gas being expended and could arguably cause the companies to go lower.

This also impacted the performance of gold today. The ambiguous message sent by Bernanke’s speech helped gold and related ETFs including SPDR Gold Fund (GLD) to push slightly higher after taking a serious hit earlier in the week.

Silver also rose marginally. iShares Silver Trust (SLV) rose as did shares of miners across the board.

Other commodities ticking higher for the day included wheat and corn for the month of December and November soybeans. Shares of related ETFs like Teucrium Corn Fund (CORN) were also trending higher, with CORN nearly back up to its 52-week high. PowerShares DB Agriculture Long ETN (AGF) was also edging in on its annual high after a strong day of trading.


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