Gold, known as the premier hedge against inflation, briefly dipped into negative territory on the year, as prospects for inflation across the globe continue to appear to wane. The $787 billion economic stimulus package that was approved by Congress in 2009, now mostly spent, failed to cause the runaway inflation many investors were predicting. Monetary policies deployed by Fed Chairman Bernanke seem to have successfully defended against deflation while avoiding red-line economic growth.
Abroad, poor economic data continues to stream out of China, the world's second-largest consumer of gold. The Chinese economy has been hurt lately by a cooling real estate market and a slower expansion of exports. In Europe, prospects for rapid economic expansion (and potential inflation) are virtually nonexistent due to the ongoing sovereign debt crisis.
Reacting to this unfavorable news, investors have reduced their gold holdings. June gold futures fell to $1,572 per ounce this week -- the lowest level of the year. Prices have fallen approximately $200 per ounce since the end of February.
For the moment, many investors are choosing to remain on the sidelines. Others, predicting that our own debt problems will eventually cause a flight to gold, have not sold. Budget cuts totaling over $1.2 trillion over 10 years, agreed upon last year by the so-called "super-committee" are scheduled to begin going into effect in 2013. If the debt debate retakes center stage, gold could once again garner the attention it enjoyed in 2011.
As of Friday morning, June gold futures were trading at $1586 per ounce.
Larger Supply Hammers Corn Prices
A USDA report released Thursday morning relieved pressure on the corn market, showing that current stockpiles are adequate and that this fall's crop could be a record-breaker. The USDA projected decreased demand for corn from livestock feeders for the coming months, alleviating short-term supply concerns. The USDA also forecasted a record 166 bushels per acre yield for the upcoming corn crop, potentially making this year's crop the largest ever, near 15 billion bushels. As a result of the upcoming massive crop, the USDA is projecting that corn stockpiles are likely to more than double by September 2013.
Following the USDA announcement, July corn tumbled to the lowest price for the year, falling to $5.78 per bushel on Friday morning. While this downward swing in prices was painful for those farmers who had not pre-sold their crop or bought price insurance, it was a welcome reprieve for ethanol producers and livestock feeders who must buy corn.