Commodity prices scored broad-based gains on Friday as traders interpreted Fed Chairman Ben Bernanke’s speech at the Jackson Hole Symposium to be opening the door for a third round of quantitative easing (QE3). While Bernanke did not give explicit guidance, the central theme of his remarks appeared to center on the idea that nonstandard monetary stimulus measures helped the recovery and appeared to have been worthwhile given the trade-off between their various costs and benefits. The central bank chief concluded with what can be interpreted as a nod toward more accommodation, saying it is “important to achieve further progress” in supporting economic growth and foster job creation and adding that the Fed will provide additional help “as needed”.
On balance, this is likely to make for a highly data-dependent environment in the days ahead as markets gauge if further stimulus is indeed “needed”, with Friday’s US Employment report of particular interest given Bernanke’s focus labor markets. Expectations call for a slight slowdown in job-creation in August, with payrolls yielding a 125,000 increase compared with the 163,000 result in July. Expectations of such an outcome may offer continued support for QE3 expectations, boosting growth-sensitive crude oil and copper prices and driving inflation-hedge demand for gold and silver (though it ought to be noted that US data has performed better relative to expectations lately). The coming 24 hours are likely to be fairly quiet however with Wall Street offline and commodity trading on US futures exchanges closing early for the Labor Day holiday.
WTI Crude Oil (NY Close): $96.47 // +1.85 // +1.96%
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