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Geopolitical
concerns have eroded confidence in paper
money, leading investors to pile into
commodities -- which, in turn, have reached
multi-year and all-time highs.
Tensions in
the Middle East and Libya have not abated,
and Japan is dealing with post-earthquake
rebuilding and ongoing nuclear issues.
We have major
issues going on both abroad and at home, and
commodities are great uncertainty magnets,"
said PFG Best senior market analyst Phil
Flynn.
The appeal of
stocks has been somewhat tarnished by the
volatile global situation, and bond
investors "have been kind of forced out by
the Fed's low interest rates," Flynn said.
Track oil,
gold and other commodities
Meanwhile, the
physicality of commodities have boosted
their appeal -- and made prices soar.
0:00 /3:16Oil
& gold: 'Trading on fear'
Precious
metals shine: "We're almost going back to a
barter system, where commodities have more
value than paper," Flynn said. "People keep
blaming the speculators, but there are good
reasons to be in commodities."
In addition to
the Middle East and Libya unrest, as well as
the Japanese crisis, Flynn said investors
are nervous about the U.S. budget deficit
and seeing "paper money being pumped out"
around the globe.
"People have
lost confidence in paper currencies right
now," Flynn said.
Instead,
they're piling into gold and silver at a
rapid clip. In Tuesday's session, gold for
June delivery hit a record intraday high of
$1,451.20 an ounce and a record settle of
$1,452.50 an ounce.
Flynn said
gold could soar as high as $2,000 an ounce
in the coming months.
Fool's silver?
Silver has
also been on a roll, having recently hit
30-year highs near $40 an ounce. On Tuesday,
silver for May delivery gained 1.8% to
settle at $39.18 an ounce.
Oil prices:
Oil has been rallying since mid-February,
when protests broke out in Libya -- Africa's
third-largest oil producer. But traders'
concerns are more about whether the regional
unrest will spread to even larger oil
producers, like Saudi Arabia, and limit
supply coming from the region.
Over the
weekend, Nigerian officials said they were
pushing parliamentary elections back by one
week following violent uprisings in the
country. Nigeria is Africa's largest oil
producer. That news gave oil a boost above
$108 a barrel Monday.
On Tuesday,
crude oil for May delivery slipped 13 cents,
or 0.1%, to settle at $108.34 a barrel.
Before Monday's close, prices hadn't settled
above $108 since September 2008.
Meanwhile, the
earthquake and tsunami in Japan have since
kept investors even more on edge. As the
world's third-largest economy recovers from
the disaster and subsequent nuclear crisis,
some analysts predict Japan will increase
its demand for oil, and send crude prices
even higher.
0:00
/3:48BullHorn: All eyes on oil
"We are
looking at the greatest threat to oil supply
we've seen in our lifetime," Flynn said,
adding that a former Saudi oil minister
recently said more unrest in the region
could push crude prices to $200 a barrel.
In spite of
all the turmoil, though, money managers
surveyed by CNNMoney expect oil prices to
ease from their recent highs, and average
out to $97 a barrel by year's end.
Gas prices:
And higher oil prices have translated to
steeper gasoline prices. On Tuesday, the
average price for a gallon of regular gas
rose 2.3 cents to $3.685 -- the 14th
consecutive increase. Prices are up 14 cents
over the past two weeks.
While they're
still about 12% below the all-time high of
$4.114 a gallon, that record was set in July
2008, as the summer driving season was
already in full swing. Current prices could
reach that point before summer driving
really even gets underway this year.
Courtesy
CNNMoney
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