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Crude Oil hit an eight-month high last Wednesday before reversing as investor sentiment waffled in the face of negative economic data from the US. Volatility in the energy markets defied predictions for a docile trading week cut short by US Independence Day, with Crude breaching US$73bbl during Asian trading before stumbling back below US$70. Weaker-than-forecast US consumer confidence data and the US$ rising against the Euro were seen by some as prompting the later falls, while others argued that the unusually high trading volumes overnight in Asia were evidence that large investment funds had been changing their Crude Oil positions for the end of the quarter, causing a temporary price rise. Nevertheless, Crude Oil registered its largest quarterly gain since 1990. Barclays Capital argued that the surge in energy, metals and agricultural products that has pushed the Reuters / Jefferies CRB commodities index up 25% since the start of March marked a “revolution” in how investors view the commodities cycle. “The usual relationships between commodities prices and the economic cycle [have] been redefined,” Barclays Capital said in its summer 2009 outlook.

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Investors are buying record amounts of Gold bars and coins, shunning risky assets for the relative safety of bullion amid renewed fears about the health of the global financial system. The US Mint sold 92,000 ozs of its popular American Eagle coin in January, almost four times that which it sold a year ago and more than it shipped during the whole of the first half of 2007. Other countries’ mints have also reported strong sales. “Large purchases of coins are perhaps the ultimate sign of safe-haven gold buying,” said John Reade, a precious metals strategist at UBS.

Inflows into Gold-backed exchange traded funds also surged in January 2009, pushing their bullion holdings to an all-time high of 1,317 tonnes. Last month’s flows of 105 tonnes were above September’s previous record of 104 tonnes, and absorbed about half the world’s Gold mine output for January, said Barclays Capital. “We estimate that investment demand [into Gold] could double in 2009 compared to 2007,” said Mr. Reade. “Purchases of physical Gold have jumped over the past six months as investors’ fears about the current financial crisis … have intensified.” The move into Gold is being driven by the very rich, with bankers saying that some clients are hoarding Gold in their vaults. UBS and Goldman Sachs said last week that investor hoarding would drive prices back above US $1,000 oz.

Last Monday Gold was trading at US$892 oz. and closed last Friday at US$942.20 + US$ 50.20 (5.6%) on the week. Traders and analysts said jewelry demand, historically the backbone of gold consumption, had collapsed under the weight of the high prices. Sharp falls in demand in the key markets of India, Turkey and the Middle East have capped the potential of any price rally. But the lack of jewelers demand has not discouraged investors. Jonathan Spall, director of commodities at Barclays Capital in London, said: “We have seen more new enquiries about investing in gold so far this year than during the whole 2008.”

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Analyst Brian Johnson of Barclay’s downgraded GM to underweight from equal weight. Deutsche Bank alcut GM to sell from hold, and saw an equity value of $0 for the stock, according to a report on theflyonthewall.com. “While further government assistance would decrease the likelihood of a GM bankruptcy, we believe any government assistance would likely significantly dilute GM’s equity,” Barclays’ Johnson wrote in a note to clients. Johnson cut his price target on the stock to $1 from $4.

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