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Gold has shown signs of recovery this week as it trades higher following a rebound in crude oil and a decline in the US currency versus the euro. Gold is once again in demand as hedge against inflation. Meanwhile Silver surged to just over 2 percent.

Oil has just recently reached 1.3 percent as the euro recovers from a three-day low. This week, gold plunged 3.7 percent, counting from the middle of March, this is gold’s hardest fall, after the US dollar’s huge losses versus major currencies, and oil fell from a record. Gold’s highest attained level was in March at $1,033.90 per ounce.

Regarding delivery intended for August, gold futures surged $9.80, or 1.1 percent, to $891.50 per ounce. In May, gold increased 3.1 percent. This year, it has reached 6.4 percent.

“Any sell-off in the energies and rally in the dollar have been leaning hard on the metals. The sell-off was overdone. The ratio between gold and crude is out of whack. If there is a sell-off across the board in commodities, the metals will be down the least. Gold and silver will hold because they haven’t rallied as much,” said Eagle Futures Inc. trader Nick Ruggiero, in New York.

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The speculation that the current decline in sugar has fueled demands caused the commodity to rise in New York trading.

Since December 7, Futures have touched the lowest level on hunch that there will be an oversupply of the commodity globally by the year ending September 30, 2009. Meanwhile, the US dollar performed poorly against six other actively traded major currencies by 0.2 percent, coming down from an earlier 0.3 percent surge. This leaves traders one thing to do - invest in commodities as a hedge against the weaker dollar.

For July, there has been a rise in sugar futures by 0.05 cent, or 0.5 percent, to 10.02 cents per pound on ICE Futures U.S. Sugar earlier reached 9.82 cents, and for this week gained 0.1 percent. However, for the month of May the commodity declined by 15 percent.

“There is demand around. It’s slowing the drop. We are finding support but no impulse to move higher,” according to senior vice president Michael McDougall, Newedge USA LLC, New York.

Worldwide sugar production is expected to be greater than demand for the commodity by 3.29 million metric tons in the 2008 up to September 2009, according to Kingsman SA, sugar broker/researcher. Meanwhile the forecast by Czarnikow Group Ltd. is that the surplus will be reduced to about 1.6 million tons in 2009 from the year ending September 30’s 11 million tons.

The market has already acknowledge the fact that the US dollar has stabilized, and as a result the prices of sugar might again fall.

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Traders are looking to commodities as a hedge against inflation while the US dollar succumbs to the euro in the midst of crude oil price increases. This just goes to show that commodities can be an attractive alternative and tool against inflation.

Crude oil advanced by 33 percent in 2008 while the US dollar dropped by 6.6 percent against the euro. This made oil as well as other commodities more attractive to traders in other currencies. There has been a decline in prices this week following a government report regarding a falling fuel consumption in the US last week as compared to the same period last year.

There has been a rise in the prices of crude oil for July by 73 cents, or 0.6 percent, which translates to $127.35 per barrel. Futures on May 22 attained a record level of $135.09. There was also a decline in prices this week by 3.7 percent. During the past year, these prices have even doubled, but now the decline has been tremendous, and is now at its lowest drop in a week since March.

“The dollar has a big impact on crude prices. Any shift in the dollar’s direction will prompt investors to look at crude as a store of value,” said oil practice director Rick Mueller, Energy Security Analysis Inc., Wakefield, Massachusetts.

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As oil fell for the third day today, the majority of US stocks increased as prices of oil greatly benefited companies that rely on consumer spending, whose earnings prospects were given a boost by the trend.

Two companies Target Corp. and Best Buy Inc. advanced with the retreating crude oil prices, which have gone down by more than $2 per barrel. Big Lots Inc., the most prominent seller of overstocked items, reported first-quarter sales and profit that exceeded analysts’ expectations. MasterCard Inc. also to a huge leap forward as it gains for the second time this week duet to the fact that consumers’ use of credit and debit cards have increased.

Seven stocks rose for every six that fell on the New York Stock Exchange. The Standard & Poor’s 500 Index lost 0.54 point, or less than 0.1 percent, to 1,390.3 at 10:05 a.m. in New York. The Dow Jones Industrial Average slipped 15.15, or 0.1 percent, 12,578.88. The Nasdaq Composite Index increased 8.01, or 0.3 percent, to 2,494.71.

Another factor responsible for the current gains in stocks was the government statement regarding US economy’s growth that by far exceeded forecasts in the first quarter as citizens bought fewer imported goods, tremendously helping curb the trade deficit.

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The market price for white sugar declined on hunch that overproduction will make sugar market go stale, pulling the price of sugar down to a five month low.

Next season Brazil, the world’s largest sugar cane grower, will be adding to sugar production by 16 percent that translates to approximately 500 metric tons — an 85 percent output, according to Czarnikow Group Ltd. This will boost output on the national level by about 7.5 percent to 35.9 million tons, translating to a global glut increasing from 1.1 to 1.6 million tons by the next season, Czarnikow said further.

Referring to sugar futures, Czarnikow also said that it will “reflect a more bullish outlook linked to rising ethanol demand … encouraging producers to stay committed to sugar. The market will struggle to absorb the build-up in stock that has accumulated during the two previous seasons.”

White sugar intended for August came down to a low $2.80, or 0.9 percent, to $321 per ton, the lowest ever counting from January 2 closing prices.

Sugar traded at $321.50 today in London. Sugar’s decline is at 4.6 percent this month.

July delivery prices dropped 0.01 cents, or 0.1 percent to 10.08 cents per pound on ICE Futures U.S., with futures for July 2009 delivery trading at 13.43 cents per pound.

“Prices for 2009 now represent a hope for a more bullish future that, almost month-by-month, appears to be receding before us,” added Czarnikow.

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Japanese stocks incurred heavy losses in six weeks as escalating commodities prices ignited fears that inflation will eat up corporate earnings, as the wavering US housing market crossed out chances for the US economy’s recovery.

Tiremaker Bridgestone Corp. led other tire manufacturers lower following the rise of rubber futures, which was to be the highest in 28 years. On the other hand Daihatsu Motor Co. suffered the most in nine months when Daiwa Securities Group Inc. announced that the costs of materials will pare profit. Meanwhile, Nissan Motor Co. went downhill when Merrill Lynch & Co. downgraded shares. The number of properties that are unsold in the United States surged to record high.

“We’re not going to see any significant reasons to buy in the next few months, and benchmarks are in for some declines. Inflation is an extremely big problem, as it means profit margins are going to be squeezed,” said head of investment management Koshi Kumagai, BNP Paribas Asset Management, Tokyo.

The Nikkei 225 Stock Average declined by 322.01, or 2.3 percent, to 13,690.19 when Tokyo trading closed. The Topix index fell 32.51, or 2.4 percent, to 1,344.18. The decline of both gauges was the worst since April 14. As if on cue, all 33 industry groups in the Topix also fell.

Thailand’s stocks, Southeast Asia’s best performers in 2008, face the possibility of extending gains due to a number of factors, such as increased government spending, tax cuts, and higher exports all contributing to a favorable forecast, and boosting economic growth, according to Mark Mobius of Templeton Asset Management Ltd.

“Thai stocks have a good chance to rise further because the new government has policies which are very positive toward businesses,” said Mobius further.

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The benchmark of Thailand — SET Index - increased by 2 percent in 2008 as of May 23, which is among the best performers of the six Southeast Asian countries with stock markets. Foreign investors purchased around 14 billion baht, which is roughly $436 million, far exceeding the Thai stocks sold this month.

Prime Minister Samak Sundaravej’s has been aiming for at least 6 percent growth in the country’s economy. This he intended to accomplish by increasing the spending on power plants, mass transit systems, and other infrastructure projects. In April Thailand’s government pared tax rates as regards property purchases to encourage consumer spending on new houses that could also mean increase in cement and steel sales.

“The government’s higher spending on infrastructure projects will increase public and private investments. Thailand is a very vibrant exporter of agricultural commodities and manufacturing products,” Mobius said.

Indeed the Thai economy swelled 6 percent during the first quarter, which is the fastest growth rate the country has witnessed in two years, increasing further consumer confidence and spending, according to the state economic advisory agency.

According to Nomura Holdings Inc., Japanese companies’ losing investments in each other’s shares have caused tremendous losses for their respective stockholders. These losses totaled $3.2 billion during the previous fiscal year.

In 2008, there were about 130 companies that posted losses in their securities investments, an increase by 13 company’s during the same period the previous year, following the decline of Topix index by 29 percent in the 12 months ended March 31, as revealed by Tokyo Stock Exchange filings.

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Even the a giant trading company in Japan such as Mitsui & Co. incurred heavy losses that reached $354 million on stockholdings, thereby missing its forecast on earnings. Hikari Tsushin, mobile phone retailer, suffered a severe blow as a total of $220 million seeped out of its earnings because of miscalculations in its investments in SFCG Co, a consumer lender.

The practice of cross-shareholding began during the 19th century and was initiated by the zaibatsu holding groups. Their purpose for doing so is to weld together strategic relationships in order to defend against takeovers that can prove fatal to these companies, said strategist Kengo Nishiyama of Nomura, Tokyo.

“Companies involved in long-term cross shareholdings are taking body blows. We’d like companies to explain their intentions regarding cross holdings, and if there aren’t any clear merits then we don’t want such moves.” said Taku Yamamoto of the Pension Fund Association, Tokyo.

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The New York Stock Exchange trading plunged to the lowest by 26 percent during present quarter since 2001 as competing platforms that include Bats Trading Inc. garnered some share of the market and while the total US equities volume surged.

Investors are trying to stay as far away as possible from the floor brokers, for they are the ones who were dominating trading floor throughout the Big Board’s history.

The ever increasing use of automated strategies forced the NYSE Euronext to renew the system by overhauling it as well as cutting the costs of every transaction to keep abreast with orders that come in a flash.

“We’re trying to make the technology move as fast as we can. The bottom line is that it’s very easy to get started and compete with us. The barriers to entry for someone to get a license and compete with us are lower than they have ever been,” said NYSE Euronext CEO Duncan Niederauer.

“Technicians should be losing sleep over this. I can’t be as trusting of my indicator, because I don’t have all the data,”‘ said Ralph Acampora (40-year Wall Street veteran who helped pioneer technical analysis).

“The competitive arena for U.S. equity trading has never been as intense. We’re in a period of indecision in the marketplace with investors debating whether the recent rebound in the market is a ‘bear trap’ or represents a sustainable rebound in global equity indices,” said head of global equities Ciaran O’Kelly, Bank of America Corp., New York.

A majority of Japanese stocks incurred severe losses as they were being weighed down by trading companies and shipping lines, amidst declining commodity prices and cargo rates.

Companies, like Mitsubishi Corp. and Mitsui & Co. that get greater than one-half of their realized profit from commodities, sent trading companies grazing the bottom. Kawasaki Kisen Kaisha Ltd. after having incurred huge losses led a decline by shipping lines.

“Some investors want to reduce their holdings of commodity-related stocks as volatility increases. I expect the stock market’s nauseating gyrations to continue,” according to said Hideo Arimura, who helps oversee US$26 billion at Mizuho Asset Management Co., Tokyo.

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The Topix index has been swinging, six times, between opposite ends of gains and losses. This has further resulted in ending down 2.98, or about 0.2 percent, to 1,376.69. This week, there has been 1.4 percent gauge lost, trimming a two-month rally by 22 percent up to May 16. The Nikkei 225 Stock Average increased by 33.74, or 0.2 percent, and closed at 14,012.20, and incurred a 1.5 percent loss.

Crude oil fell 1.8 percent, the largest losses ever incurred since April 30, to $130.81 per barrel yesterday. Gold, on the other hand, plunged 1.1 percent from a one-month high. Copper hit bottom this week.