October gold closed at $1,333.30 on Friday, up $4.20 and over the past three weeks "recovered" 8.8% from the heavy losses suffered since trading at $1,911 September of 2011. We had commented to investors asking about gold that in 1980 when gold first traded at $875 per ounce, it had taken 25 years for those buyers to just break even. The ROI was not very gratifying financially. Asked if it could happen again from the $1,800 level, I responded, "why not" and tried to talk them out of it. For now we prefer the sidelines in precious metals since the response to the geopolitical events in the Middle East has not provided any material influx of demand for gold. In the past such events would have met with an immediate positive response. We are on the sidelines in gold. September silver closed Friday at $20.02 per ounce, down 13.4c. For those that "must have" a precious metal in the portfolio, we prefer silver based on its past percentage performance against gold. October platinum closed at $1,432.80, down $15.10 per ounce or 1% while September palladium closed at $726.20 per ounce, down $14.55, or 2%. We prefer the sidelines here as well while preferring palladium over platinum.
Grains and Oilseeds:
September corn closed at $4.91 ¾ per bushel, down 4 1/4c tied to output expectations of a 23% increase. We prefer the sidelines in corn. September wheat closed unchanged Friday at $6.49 ¼ per bushel holding steady but the USDA report showing demand for U.S. wheat lower and projections for increase global supplies. We are on the sidelines here as well. November soybeans closed at $12.29 per bushel up 5c on pre-weekend shortcovering but recent expectations for a bumper crop barring any early frost, is negative for beans as well as corn. For the group we have to remain on the sidelines for now. However, in the case of soybeans, I like the idea of putting on a few out of the money calls to take advantage of any early frost conditions that may emanate. Brazilian weather also a consideration.
October live cattle closed Friday at $1.25975, up 47.5 points on speculation that mile U.S. weather could lead to higher demand for beef as "grilling season" progresses. Wholesale prices gained 0.4%, it largest increase in four weeks according to the USDA. We like cattle from here but use stop protection. October hogs closed at 84.85c per pound down 1.125c, or 0.8% on Friday. Reduced consumer demand the main reason. Expectations for increase Chinese pork imports might reverse the recent downtrend. However, we prefer the sidelines in hogs.
Coffee, Cocoa and Sugar
: September coffee closed Friday at $1.2260 per pound, down 2.2c tied to reduced concerns over Brazilian crop damage which was less than previously expected. We prefer the sidelines in coffee but a few puts may be in order. September cocoa closed Friday at $2,331 per tonne, down $16 on profittaking after recent figures put the cocoa grind at better than expected in the U.S. and Asia. We had suggested call purchases last week and now would just hold those calls and add on setbacks. Concern that the West Africa main crop might be impacted by poor weather hindering pod development and expectations for a smaller crop next season could prompt additional buying. October sugar closed at 16.47c per pound, up 8 points but anticipated reduction in demand could increase selling pressure on sugar prices. Stay out.
October cotton closed Friday at 85.20c per pound, down 99 points tied to expectation that China, the world’s largest user, will product more cotton that previously forecast. We prefer the sidelines for now.
Prices through yesterday were up 14 percent this year on signs of reduced output in the U.S., the world’s largest exporter.