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Gasoline Hits New High on Iranian Nuclear FearsPosted Sunday, February 26, 2012, at 4:24 PM
The market for unleaded gasoline responded to the drama in oil-rich Iran, reaching its highest level in more than 6 months. The situation in Iran deteriorated further this week as International Atomic Energy Agency head Yukiya Amano reported that Iran refused to allow him to inspect a military complex outside of Tehran. It is suspected that the complex houses a secret underground nuclear facility.
The main decision maker on nuclear issues is Ayatollah Ali Khamenei, Iran's supreme leader. In response to international pressure to allow the inspections, Mr. Khamenei stated, "Iran's nuclear path must continue firmly and seriously... Pressures, sanctions and assassinations will bear no fruit. No obstacles can stop Iran's nuclear work."
Despite the fact that Saudi Arabia has stated it will produce more crude to account for any lost supply resulting from U.S. and European sanctions against Iran, many countries are bracing for further turmoil in the Middle East, including escalating tensions between Iran and Israel. Meanwhile, U.S. consumers are bracing themselves for even higher pump prices, which reached all new highs this week as well.
As of Friday, April unleaded gasoline futures were trading at $3.31 barrel, up fifteen cents on the week.
U.S. Dollar in the Drain
The U.S. Dollar lost some of its luster this week, falling to the lowest value against major trading partners in over three months. The drop in the greenback came as European nations appeared to have staved off Greek default for the time being, paving the way for calmer markets overseas and stronger European economies. The renewed optimism caused currencies like the Swiss Franc, British Pound, and Eurocurrency to rally more than two percent against the U.S. Dollar.
As the U.S. Dollar loses value, it makes commodities appear less expensive for investors paying with foreign currencies, allowing them to buy "discounted" commodities priced in U.S. Dollars. Gold and silver were especially strong this week, aided by a weak dollar, rising to new highs for the year. On Friday, gold for April delivery vaulted over $1780 per ounce, while silver for March delivery shot up to $35.72 per ounce. Both markets have been rising since the New Year, with gold gaining 14 percent and silver skyrocketing 28 percent.
Despite the recent rallies, gold and silver are still down significantly from their recent record highs made at $1920 and $49.82, respectively, last year.
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Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.
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