Risk premium vs. growth

Gold(COMEX:GCM14) and silver(COMEX:SIM14) prices also have been riding the geopolitical risk roller coaster as well as trying to time the Federal Reserve. On Friday the government showed that U.S. nonfarm payrolls increased by 192,000 jobs last month, slightly below economists' estimate and well as the whisper number and in a zone where it was not strong enough to worry about raising rates or a slowdown in tapering.  So gold rode the risk trade rising mainly on fear. Gold Core reported that “Gold surged 1.3% on Friday - its biggest percentage increase since March 12. Gold is not far from a one-week high of $1,306.50 hit in the previous session.  Gold Core said that Iraq's central bank said on Friday its gold reserves had reached 90 tons, after buying 60 ton over the past two months to support the Iraqi dinar.  They point out that Federal Reserve Chair Janet Yellen said last week that slack in labor markets showed accommodative policies will still be needed for some time which is also bullish for gold.

Gold Core also said, “UK government now has powers to raid bank accounts and confiscate deposits. On Saturday the Financial Times covered the story and the fact that the hitherto unnoticed measures are now facing scrutiny and a backlash. “George Osborne is facing a backlash over plans to give HM Revenue & Customs unprecedented powers to dip into taxpayers’ bank accounts to seize unpaid tax debts,” according to the FT. MPs, banks and charities want robust safeguards over powers that will allow the Revenue to order banks to pay outstanding debts from taxpayers’ bank accounts, following fears that the measure could be used inappropriately and cause hardship. Andrew Tyrin, who chairs the Treasury select committee, said the MPs intended to hold further hearings into the new powers, which he said could set a worrying precedent. Many banks want judicial oversight to apply to the new powers, as they worry about being caught between irate customers and the tax authorities. “HMRC doesn’t have the best record of getting things right,” a banking source told the FT.

The idea was previously floated in a 2007 consultation, but it was dropped after widespread criticism over the adequacy of the safeguards, the possibility of creating hardship and the risk of HMRC error.

Grain prices may move today export inspections as well as our first crop progress report. Soybean stockpiles have been tight so it will be interesting to see it the demand stays strong, Farmers are opting to plant less corn. Yet with winter hanging on iota will be interesting to see just how much planting will get done but more than likely it will be below the five-year average.

Weather in Brazil gave coffee(NYBOT:KCK14) a boost as dry weather is reducing the crop prospects again. Bloomberg reports that Coffee shipments from India, Asia's third-largest grower, are poised to fall this year as a rally in global prices deters buyers from Italy to Russia and after unseasonal rains cut output for the first time in six years. Exports may decline as much as 10% from 312,756 tons in 2013, said Ramesh Rajah, president of the Coffee Exporters Association of India. The harvest probably dropped below 300,000 tons in the 12 months started Oct. 1 from a record 318,200 tons a year earlier.

ETF Trends reports that the iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (NYSEArca: JO) jumped 7.3% Friday while the iPath Pure Beta Coffee ETN (NYSEArca: CAFÉ) surged 6.4%. Coffee has been the best performing asset year-to-date, with JO up 58.5% and CAFE up 53.9%.

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About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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