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Gasoline Nears Six Month Highs, Here Is The Reason

Nearly everyday we hear about the problems in the Middle East with Iran. While there could be conflict with the oil producing nation; it is important to realize that this is not causing gasoline to increase in price. Gasoline has been steadily rising over the past four months and is now trading near a six month high. On December 16, 2011 the United States Gasoline Fund (NYSE:UGA) was trading as low as $45.17 a share. This morning the UGA is trading higher by 0.64 cents to $53.14 a share. Last week, the UGA made a new five month high at $53.78 a share and remains strong on the charts at this time.

So what is the reason for the higher gasoline prices? It is simple, it is the weaker U.S. Dollar Index. When the U.S. Dollar Index declines gasoline, oil, and just about every commodity will inflate and trade higher. Gasoline prices affect every U.S. consumer and this could ultimately be problematic down the road. We must all remember that the U.S. consumer accounts for roughly 70.0 percent of the gross domestic product in the United States.

Traders can just as easily look at the price of copper and gold to see how much these commodities have climbed since the dollar has declined. The iPath Dow Jones UBS Copper Subindex Total Return ETN (NYSEARCA:JJC) has increased by $7.00 since December 15, 2011. The SPDR Gold Shares (NYSE:GLD) has increased by $22.00 since December 29, 2011. These are just some of the inflationary effects of a weaker U.S. Dollar.

Nicholas Santiago

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