The March U.S. Dollar Index (NYBOT:DXH14) closed at 81.035, up 24.7 points and to a one-month high against the euro after outgoing Federal Reserve Chairman Bernanke defended his tenure of economic stimulus at an economic conference. His farewell speech gave no indication of any expected policy change and the reduction of the stimulus program, albeit only $10 billion leaving the monthly asset purchase at $40 billion, prompted ideas of higher U.S. interest rates. That would bode well for the dollar. Currencies that lost ground included the Euro 64 points to $1.3688, the Swiss Franc 51 points to $1.1056, the Japanese yen 10 ticks to 0.09545, and the British Pound 9, ticks to $1.6405. Both the Canadian dollar and the Australian dollar posted gains of 19 points to 9381 and 38 points 8902 respectively. We maintain our preference for the dollar.
February crude oil (NYMEX:CLG14) closed at $93.96 per barrel, down $1.48 or 1.6% on Friday, mostly attributable to the expected improvement in Libyan production and reports of increased U.S. distillate and gasoline supplies. Support at the lows was prompted by a larger than expected decline in U.S. crude supplies but some of that could have been prompted by weather conditions in the U.S. We remain bearish for crude.
February gold (COMEX:GCG14) closed at $1,238.60 per ounce, up $13.40 and for the week posted a 2% gain. The extreme loss in gold last year has prompted bargain hunting and a short-covering correction. We see no particular reason to buy gold other than for that new "Rolex watch" you promised your spouse….March silver closed at $20.21 per ounce, up 8c also on short-covering after the heavy selling that followed gold last year. Of the two we prefer silver. Some gold "bugs" suggest that with the Lunar year approaching, a period of "gold buying" usually ensues. We do not "buy into" that theory and suggest continued analysis based on supply/demand and global economic conditions related to the impact on currencies and interest rates. Anything other than that involves "clutching at straws" in our opinion.
One of our concerns is the expansion of the "Bitcoin" anomaly, which we expect will create a "bubble" in as much as it has no material backing or intrinsic value and its expansion is of concern to me. April platinum closed at $1,414.20 per ounce, up $9.60 and is up 2.6% on the week. March palladium closed at $731.20 per ounce, up 95c and for the week gained 2.7%. Once again our preference here is palladium since it’s applications are similar and the disparity in price is, in our opinion, unsupportable.
Grains and Oilseeds:
March corn (CBOT:CH14) closed at $4.23 ½ per bushel, up 3c on short-covering but a recent report by Informa Economics suggested that the preference for plantings for corn could supersede soybean plantings for the 2014 harvest. That could keep pressure on corn prices, which declined last year from the July 2013 highs around $5.40. We prefer the sidelines in corn. March wheat (NYBOT:WH14) closed at $6.06 ¾ per bushel, up 9 3/4c tied mostly to the huge purchase by Egypt’s grain authority and other large orders by Russia, the Ukraine, France and Romania. The decline from the $7.20 highs of October prompted support for wheat and with lows holding, we could see additional short-covering and new buying. We like wheat from here but use stops. March soybeans (NYBOT:SH14) closed at $12.72 ¼ per bushel, up 2 1/4c on short-covering, but expectation for a record planting next year could impede price recovery and continue to pressure prices, so we are on the sidelines.
Coffee, Cocoa and Sugar:
March coffee (NYBOT:KCH14) closed at $1.1645 per pound, up 5.05c on short-covering and on reluctance of south American producers to provide beans to the market. Expectation of some Vietnamese beans to hit the market have not materialized and increased Robusta offers could reduce demand for the Arabicas, which are traded in New York. We prefer the sidelines. March cocoa (NYBOT:CCH14) closed at $2.710, per tonne, up $74 on short-covering after speculative selling in New York and London tied to increased certified stocks in New York. Good arrivals from West Africa could provide additional pressure on prices. We prefer the sidelines. March sugar (NYBOT:SBH14) closed at 16.08c per pound, down 21 points on a lack of fresh fundamentals. We are on the sidelines.
March cotton (NYBOT:CTH14) closed at 83.31c per pound, down 73 points tied to a weaker forecast for China’s economy and concern over export demand. We are on the sidelines in cotton for now.