Precious Metals: December gold closed at $1,639.80 per ounce, down $101.90, for the worst one day percentage loss, 5.9%, since June of 2006. We noticed fewer TV ads from "gold bugs", recommending the purchase of gold this week. We could see some shortcovering and possible new buying but as we have reminded investors of 1980, when gold first high $875 per ounce, it took those investors 25 years to break even. Hold any small positions of physical gold but throw away your gold charts and chart the U.S. dollar and interest rates for potential "future" price movement. December silver closed at $31.02 per ounce, down $5.5580. Silver has lost nearly $20 per ounce from its high. January platinum closed at $1,617.40, down $98.20 while December palladium lost $28.30 per ounce to close at $635.75. As we have been suggesting, stay on the sidelines.
Grains and Oilseeds: November soybeans closed at $12.58 per bushel, down 25c on general commodity selling tied to the strong dollar and the necessity to meet the margin calls generated by the heavy selling of Thursday. December corn lost 11 1/2c per bushel to close at $6.38 ½ in conjunction with other commodities. However, we favor the long side of corn based on fundamentals and potential reduced supplies. December wheat closed at $6.40 ¾, up 7c on shortcovering and potential increased demand. We prefer the sidelines in all but the corn.
Cattle & Hog report: December cattle closed at $1.16725 per pound, up 85 points on shortcovering in front of the weekend and after recent selling from the $1.19 area. We continue to favor the long side of cattle. December lean hogs closed at 83.725c per pound, up 1.725c on shortcovering and new technical buying. We prefer the short side of hogs but would not add to short positions at the current time.
Coffee, Cocoa and Sugar: December coffee closed at $2.3485 per pound, down 4.4c on long liquidation and margin call selling prompted by severe losses in other commodities. We prefer the sidelines but on any further selling would take on a few longs. December cocoa closed at $2624 per tonne, down $58 on long liquidation and continued technical and supply pressure. We favor the short side of cocoa on any rallies. October sugar closed at 25.01c, down 66 points on continued heavy selling from the trade. Technicals also a factor to the selling. We could see still lower prices and would avoid sugar.
Cotton: December cotton closed at $1.0124 per pound, up 1.95c on shortcovering after recent sharp price declines. We see good support at the $1.00 level but any breach of support could take prices down to the 85-90c level. The potential for reduced demand from Asia could be the determining factor even against product losses tied to the extreme Texas growing areas.
John L. Caiazzo