Market Insider

Bernanke Testimony a 'Momentum Player's Dream'

Gold is at a new high above $1,585 an ounce, silver surged more than 7 percent to its highest level in six weeks, and U.S. oil prices are nearing triple-digit territory again.

It's a momentum trader's dream, and Federal Reserve Chairman Ben Bernanke has been a key driver.

Bernanke's testimony has been a nail biter for commodities traders. They're listening to every word for a clearer picture of the future of the Fed's accommodative monetary policy. Bernanke has talked of doing more if needed, precisely what the Federal Open Market Committee minutes revealed Tuesday, and that commentary has helped send the dollar sharply lower and commodities soaring.

With the U.S. dollar index down about 1 percent, U.S. oil futures contracts are nearing the $100 a barrel mark. Corn and wheat have jumped 3 to 4 percent in the morning session, and gold is skyrocketing, gaining more than $25 in early trading. Some traders posit the precious metal could be trading at $1,600 by the 1:30 p.m. ET close of floor trading.

"Bernanke, stimulus on two continents and China growing—all move gold up," said precious metals analyst George Gero of RBC Capital Markets. "On top of all this, crude figures were surprisingly bullish adding to the reasons for inflation hedging in gold and other precious metals."

WTI oil futures climbed more than $1 to an intraday high near $99 after the Energy Information Administration reported U.S. crude oil supplies fell by more than three million barrels, a decline that was much larger than expected by analysts.

But Bernanke has played the biggest role in the big bounce in overall commodities complex. The CRB Index, which encompasses 19 commodities, is at its highest level in over a month, up 1.5 percent at midday. The perception that quantitative easing will continue—even if it's not exactly called QE3—is keeping commodities well bid, traders and analysts say.

"The Fed seems to be leaning towards more QE3," said Tom Pawlicki, commodities analyst at MF Global. "That's a positive until bad economic data comes out otherwise, which would tip the move in the other direction."

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