Big news on the economic front was released on Wednesday this week when the Federal Reserve published the minutes of its most recent FOMC meeting. The minutes revealed that members of the committee had lowered their forecast for U.S. economic growth and increased their forecasts for unemployment and inflation.

They revised their range of 2008 economic growth lower by 0.5 percent, the unemployment rate forecast was increased by 0.4 percent, and both overall and core inflation projections were increased by 0.3 percent. Because this was the first revision that the Federal Reserve had released to the public since October of last year, it carried a lot of weight in trading on Wednesday and could have some longer-term implications for commodity market sentiment.

The news sent equity markets tumbling early on Wednesday, though they recovered later in the day. Commodity markets took the news as further evidence that the FOMC will cut interest rates further in order to prop up economic growth and that these cuts simultaneously will prop up inflation. Higher inflation and lower interest rates are bullish for commodities and traders' sentiment seemed to push them to buy commodities of all types.

A similar sentiment swept over commodities last week when Fed Chairman Bernanke said that the Fed stood ready to lower rates to support the economy. The reaction this week was nearly identical to last week.

The dollar fell sharply and hard assets like gold and oil were up sharply. In fact, both gold and oil made new record highs on Wednesday with April crude oil stopping just short of $101 per barrel and gold surpassing $940 per ounce.

Because high inflation erodes the purchasing power of a currency and other financial instruments, many traders and investors look to hard assets like gold, oil and agricultural products as a hedge against inflation, as these assets tend to rise in price along with inflation. Gold may have been the best example of this hedge. After closing just under $930 per ounce on Tuesday, gold had traded lower early on Wednesday until the minutes were released. By Thursday, gold had reached a high of $958.40, better than a 2 percent increase in just two days. On the full week, gold was trading up 5.8 percent by midday Thursday.

Even before the Federal Reserve's minutes were released on Wednesday, crude oil saw a huge price spike on Tuesday. After settling last Friday at $95.45 before the three-day weekend, crude rose as much as $4.40 on Tuesday before settling at $99.70, a gain of 4.5 percent on the day. News that a Texas oil refinery had caught fire, causing widespread damage, initially pushed energy prices higher.

Following this was a whisper that OPEC was debating a production cut at its next meeting. Though this cut seems unlikely given the already high price of oil, the rumors gave some support to the rally. The final piece of bullish news came later in the day as rumors that a member of a Nigerian militia had been shot prompted a promise of widespread, retaliatory violence against oil production infrastructure. This bullish fundamental news, coupled with the recent weakness in the dollar and inflation fears could continue to support oil prices in the near future. It remains to be seen whether or not slower economic growth in the U.S. will cause a decrease in energy demand, but for now demand seems to be high enough to keep crude oil prices high.

Opinions expressed solely are those of the writer. Walt Breitinger is vice president of commodities at A.G. Edwards and Sons. He can be reached at (219) 738-6460. Walt Breitinger, V.P. Commodity Investments A.G.Edwards & Sons 219-738-6460