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Economy in Brief

Commodity Prices Strong - Except Natural Gas
by Tom Moeller March 6, 2006

Crude oil prices have been quite strong of late. On Friday, spot WTI crude stood at $63.68 per barrel. Still down slightly from the early year highs near $68, prices have recovered from below $58.00 just two weeks ago.

That strength fueled inflationary concerns generally and lifted Friday's gold price to $565.00 per ounce, up $26 from two weeks earlier. Since 1980 there has been a 66% correlation between the level of gold prices and the y/y change in consumer prices.

Also during the last two weeks, industrial metal prices were strong due to indications of a resilient factory sector. The JoC-ECRI Industrial Metals Prices Index rose 4.1% (14.8% y/y) since mid-February due to a 7.8% (21.3% y/y) rise in aluminum ingot prices and a 2.7% (52.1% y/y) gain in high grade copper. In addition, prices of stainless steel scrap are up 18.8% (-4.3% y/y) since year end '05.

The laggard on the pricing scene has been natural gas. As of Friday, The Henry Hub price for gas fell to $6.59/mmbtu (-1.6% y/y), nearly half the high of $12.72 averaged during December. January's record warm temperatures did drop to a more seasonable cold during February, but warm temperatures during the last week hint that the end of the heating season is near.

Retail gasoline prices at $2.25 (16.6% y/y) per gallon also are off the earlier lows but very recently have fallen 10 cents from late January.

The Economic Outlook for the United States, a speech by Federal Reserve Vice Chairman Roger W. Ferguson, Jr. on Friday, is available here.

Weekly Prices 02/28/06 12/27/05 Y/Y 2005 2004 2003
Light Sweet Crude Oil, WTI  (per bbl.) $61.42 $58.16 18.8% $58.16 $41.78 $32.78
Gold: Handy & Harmon (per Troy Oz.) $556.00 $568.75 28.3% $507.40 $443.40 $416.25
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