Oil N' Gold Focus: Oil's 10% Weekly Rally May Not Be Caught Up By Fundamentals

Apart from 'AIG', the most popular buzzword last week must be 'QE'. After the Fed announced to inject $300B into Treasury and $1.45 trillion into MBS and agency debts, the market is filled with speculation that the ECB is the next central bank to enter the quantitative easing (QE) regime after SNB, BOE, BOJ and Fed.

Commodity prices rocketed last week with The Reuters/Jefferies CRB Index of 19 raw materials increased 7.1%, the most in two months, to 226.08 as investors believe the Fed actions will cause inflation and weakness in USD.

Crude Oil: WTI crude oil price recorded a 5th consecutive weekly gain as the Fed's massive credit easing plan reignited investors' confidence on economic recovery. Furthermore, the asset buying program is effectively money printing in nature. Worries about inflation and depreciation in the USD became the market's focus again. These concerns are positive for commodity prices. The April futures(expired Friday) rallied to 3-month high at 52.98 Thursday before settling at 52.07 Friday, gaining 11% on weekly basis.

After the 2-day FOMC meeting, the FED announced that, apart from keeping policy rate low (currently at 0-0.25%) for an extended period of time, it will purchase up to $300B of long- term Treasury securities in the coming 6 months. At the same time, the central bank will use up to $1.45 trillion for purchase of MBS and other agency debts. Investors reacted positive to the news with both equity and commodity markets surged immediately.