On Friday, August 17, I posted the following comments on my blog, which was entitled, Iron Ore: So Much for Global Growth (Welcome Recession), "Probably
no other commodity is tied to global growth, especially China’s growth, than the
key steel-making ingredient that is Iron Ore.
The iron ore price continues to plunge. In other words, so much for global
growth! (Interesting, this is the one
commodity that is not a futures contract, cannot be manipulated by trading
desks or by hedge funds.) $122.74 is
critical support for Iron Ore. If this
price level is penetrated, downside price projection is January 2009 level of $49. (I will definitely be monitoring Iron Ore on a monthly basis.)"
Well, August data is finally available. (See the following chart.) And, iron ore prices plummeted right through the critical support level of 122.74 to close at 107.80, or a 15.74% decline from July. Year over year, the percentage decline in iron ore prices is 39.15%. Therefore, the downside price projection is $49. In addition, the $122.74 price penetration does signal the recession is at hand. In other words, deflation should be the number one concern, not inflation. Why? Because falling prices are a direct consequence of deflation. Just look at the current level of interest rates and real estate values for evidence of the deflating environment.
Well, August data is finally available. (See the following chart.) And, iron ore prices plummeted right through the critical support level of 122.74 to close at 107.80, or a 15.74% decline from July. Year over year, the percentage decline in iron ore prices is 39.15%. Therefore, the downside price projection is $49. In addition, the $122.74 price penetration does signal the recession is at hand. In other words, deflation should be the number one concern, not inflation. Why? Because falling prices are a direct consequence of deflation. Just look at the current level of interest rates and real estate values for evidence of the deflating environment.
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