Commodity costs, rising since December, fell sharply Tuesday as inflation begins to curb demand and slow economic growth. As demand begins to erode from the pressure of high commodity costs, Goldman Sachs led the way and others followed by selling off commodities, which sent costs diving. As commodity costs have soared, something had to give and in this case it is consumer demand, which as it falls, is sending commodity prices down in turn. Article source -  Will Goldman-triggered commodity rout lower U.S. gas prices? by MoneyBlogNewz.


 

Goldman warns of demand destruction

By the end of the day on Monday, April 11, there was an end to the advancement of commodity prices after they rose 25 percent just since December. There started to be a commodity rout after warnings on commodity price decreases from Goldman Sachs. There was also a warning from Japan's economic minister that there would be more damage than believed from the earthquake and tsunami on March 11. Oil fell more than 7 percent and copper ended Tuesday with its largest one-day loss since February. Goldman explained that oil and gasoline are around the Spring 2008 amounts currently. The concern is that there can be long lasting "demand destruction" on oil due to the high costs. There were really peaceful elections in Nigeria while the chances of Libya figuring anything out seem possible right now. This means those betting on fear of these events are no longer going to stopping the oil price increases.


 

Commodity costs change again

Some analysts think Goldman triggered the commodities rout in order to cash in and position itself for a more profitable entry point into a longer term upward trend. Goldman's comments occurred, however they weren't the only thing. There has been lots of pressure on the costs for commodities. High oil prices could threaten the growth of the economy according to a report on Tuesday from the International Energy Agency. On Monday the International Monetary Fund projected that inflation borne by high commodity costs would slow global economic growth from 5 percent last year to 4.5 percent in 2011 and 2012. In his daily remarks to subscribers Tuesday, Richard Russell, publisher of the Dow Theory Letters, said the markets might be preparing for the end of the Federal Reserve's quantitative easing program. With the $600 billion that the Feds bought in Treasury Securities, there has been lots of cheap cash. This makes for more costly commodities.


 

How United States customers' factor in

The United States consumer makes a huge difference to commodity prices, with Goldman Sachs in the background. A MasterCard report released Monday showed that gasoline sales dropped for the fifth consecutive week. For a couple of months, there was an increase in demand, before it stopped. This decline wasn't anticipated. However the average gasoline price in the U.S. is already 41 cents higher than the same period in 2008, when the average gasoline price peaked at $4.11 in July. This time last year, price was down 80 cents a gallon. MasterCard stated that last week there were 2.7 billion gallons of gasoline sold, which is 3.6 percent lower than last year at this time. There was a 70 percent decrease reported at most gas station chains in gasoline sales according to an Oil Price Information March survey. A decline of 3 percent or more was reported by 50 percent of them.


 

Articles cited

Barrons

finance.yahoo.com/banking-budgeting/article/112536/commodities-selloff-possible-correction-barrons?mod=bb-budgeting&sec=topStories&pos=7&asset=&ccode=

Reuters

reuters.com/article/2011/04/12/markets-metals-idUSLDE73B0WS20110412

The Street

thestreet.com/story/11080240/2/goldman-calls-commodities-top-is-now-the-time-to-sell.html

Delcotimes.com

delcotimes.com/articles/2011/04/11/news/doc4da2fdeae7538694359346.txt?viewmode=fullstory