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Wednesday, Dec. 24, 2014

Draghi Drags Down Gold

Posted Friday, December 9, 2011, at 1:19 PM

An announcement made this week by Mario Draghi, a powerful figure in Europe's fight to avoid recession, sent a tremor through the precious metals markets.

The recently-appointed President of the European Central Bank stated that he would not support a policy of ramping up purchases of government bonds of debt-ridden countries like Spain and Italy. Interpreting Draghi's move as less inflationary than expected, investors sold off gold and silver positions. Silver prices immediately fell Thursday more than a $1.80 per ounce and gold fell more than $50 dollars per ounce. On Friday, March silver futures were trading at $32.26/oz, down $0.60 on the week. February gold futures were trading at $1720/oz, down $30 on the week.

Corzine Questioned

As the global financial community was focused primarily on Europe, a U.S. House committee questioned the former head of MF Global, a large player in the area of commodity futures that went bankrupt in October. Ex-CEO Jon Corzine stated that he had no knowledge of the location of up to $1.2 billion in missing customer funds.

Corn Market Crumples

A USDA report released Friday morning indicated an increased stockpile of US grains. Although corn reached record high prices earlier this year near $8 per bushel, they have since turned sharply lower. Corn fell this week to a one-year low at $5.70 per bushel, down 28% in the last 6 months. Prices fell this fall as harvest proceeded with few problems, ensuring that this year's crop would make it from the field to the market with little interruption.

Additionally, there has been decreasing demand for US corn, our most valuable crop. Livestock producers, who have the luxury of substituting wheat for corn, have seen relatively low wheat prices lately. As protein-rich wheat is seen as giving meat and poultry producers a better "bang for their buck," corn sales have been down.

As of midday Friday, corn for December delivery was trading at $5.80, while soybeans for January delivery were trading at $11.10 per bushel, down another 25 cents this week.



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Commodity Futures File
Alex Breitinger
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Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.
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