The September U.S. Dollar Index (NYBOT:DXU13) closed Friday at 81.15, up 12.3 related to U.S. Treasury yields. Lower U.S. interest rates detract from dollar investment attraction and for the week declined by around 1%. Friday’s action was short covering in front of the weekend. We had suggested recently taking profits after our long term bullish stance on the dollar. Currency losses included the Euro losing 48 points to close at $1.3343, the Swiss Franc 33 points to $1.0847, and the British Pound 38 points to $1.5506. Gains were posted by the Japanese yen 31 points to .010393, the Canadian Dollar 29 points to .9713, and the Australian dollar 74 points to .9172. These markets will continue to be directed by U.S. and Eurozone interest rates, and economic data. We prefer the sidelines for now.
The September crude contract (NYMEX:CLU13) closed Friday at $105.97 per barrel, up $2.57 tied to the gains in Chinese industrial production and the increase in the International Energy Agency’s global demand forecast. Friday’s gain offset the five-day losses in price. While we have been negative toward crude based on adequate supply expectations we also offered the caveat of concerns that the Egyptian "crisis" could result in closure of the Suez Canal through which much of the world’s oil is shipped. We prefer the sidelines for now.
September copper closed Friday at $3.3080 per pound, up 3.75c tied to China’s economic data which showed factory production grew 9.7% in July from the prior year. Expectation had been for an 8.9% increase. China is the largest buyer of industrial metals and the recent recessionary trend had provided pressure on prices in line with our bearish expectations. Our suggestion of "taking profits off the table" in recent commentaries was prudent and we are now on the sidelines in copper.
December gold (COMEX:GCZ13) closed Friday at $1,312.20 per ounce, up $2.30 tied to the better than expected economic data from China, a major consumer of industrial and precious metals. We could see further buying but our overall position has been to remain on the sidelines. The wide price swings in metals are not conducive to investment by retail clients and the sharp decline from the loft levels of $1,900 per ounce to $1,200 per ounce is evidence of our sideline position. Investors who insist on having a precious metal in their portfolio should consider silver on the basis of long term percentage gains over gold. Otherwise stay out. On Friday September silver closed at $20.41 per ounce, up 22c or 1.57% against the gold gain of 0.27%. October platinum closed Friday at $1,500.60 per ounce, up $9.00 while September palladium gained $2.45 to close at $741 per ounce. We consider these markets as trading vehicles for professionals.
Grains and Oilseeds:
September corn (CBOT:CU13) closed Friday at $4.64 ¾ per bushel, down 8 3/4c tied to expectation of U.S. farmers about to produce the largest corn crop ever along with increasing global stockpiles the largest in 13 years. Hedge funds as well as speculators are betting on continued price pressure for corn. We are on the sidelines. September wheat (CBOT:WU13) closed at $6.33 ½ per bushel, down 7 ¾c on continued pressure from the recent USDA report, which also impacted soybeans. November soybeans (CBOT:SX13) closed Friday at $11.83 per bushel, down 1 1/4c and as with others in this segment we are on the sidelines. Our recent suggestion of putting on a few calls remains intact but would not add to existing positions for now. Weather in the U.S. growing areas as well as Brazil will determine future price action. For now our "crystal ball" is "cloudy" and offers no clue.