Precious Metals: August gold closed at $1,482.60 per ounce, down $20.20 as expectations for a solution to Greece’s debt situation and gains in global stock markets reduced demand for relative safe havens such as bonds and precious metals. September silver lost $1.127 per ounce to close at $33.705. The white metals, which are used in automobile catalytic converters, fared no better with October platinum losing $9.30 to close at $1,716.80 and September palladium losing $3.30 per ounce to close at $757.45. Once again we would avoid precious metals. The "exuberance" in the media over gold ownership continues to attract public buying of coins and I would suggest a "history lesson" I have used at times. In 1980 when gold first hit $875 per ounce, the same media attention prompted heavy buying by the public. Unfortunately it took those buyers 25 years to break even on that "investment". Could it happen again? Possibly, if the global economies improve in fact rather than analyst optimistic reporting. We could see renewed interest if the equity markets do what I expect, mainly experience sharp declines and if economic growth proves to be a "myth" and a safe haven is once again sought. Otherwise we prefer the sidelines on a "wait and see" basis.
Grains and Oilseeds: September corn closed at $6.06 ¾ per bushel, down 41 1/4c after closing limit down 30c the previous day on USDA revised planted acres report showing an increase of 1.6 million acres. The USDA also raised its harvested acre estimate by 1.7 million acres from its June estimate. The report prompted heavy long liquidation for two days but on Friday corn managed to recover from the intra day low of 603. The December contract traded as low as $5.75 ½ before recovering to $5.96 ¾ .We continue to favor the long side of December corn based on our expectations for increased global demand for "food" by people as well as animals. Hold long positions in December corn. December wheat closed at $6.60 per bushel, up 2 1/2c but lost nearly 50c per bushel for the week. The USDA report was viewed as bearish for wheat. We favor the sidelines. November soybeans closed at $13.12 ½ per bushel, up 18 1/2c as recent low prices made U.S. soybeans attractive against Brazil. We favor the sidelines.
Cattle & Hog report: August live cattle closed at $1.1285 per pound, up 1.975c correcting from Thursdays losses and tied to firm cash markets. We could see further price gains with cattle remaining in a bullish trend both technically and fundamentally. August lean hogs closed at 93.15c per pound, up 1.475c also recovering from Thursdays selling. The discount to cash hog prices could further support futures. We like hogs from here due to the summer "barbecue" season but would use stop protection.
Coffee, Cocoa and Sugar: September coffee closed at $2.6365, per pound, down 1.95c on long liquidation after recent gains. Prices are working back from lows but a long way from recovering to the $3.00 level we saw in May. We like coffee from here but with stops below $2.50 basis the September contract. September cocoa closed at $3,155 per tonne, up $4.00 and continuing to recover from the recent $2850 level. We could see additional shortcovering early in the week but would raise trailing stops on any price gains. October sugar closed at 27.25c per pound, up 91 points on shortcovering. We have no opinion for sugar but could see further attempts at the 30c level. Adequate global supplies could halt any improvement in prices.
Cotton: October cotton closed at $1.2181 per pound, down 1.88c tied to the USDA report. We could see further long liquidation. We have been bearish for cotton for some time and now suggest taking some profits off the table. Move to the sidelines for now.
John L. Caiazzo