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Tuesday, July 22, 2014

Oil Slides, Gold Glitters

Posted Friday, June 1, 2012, at 1:11 PM

Disappointing employment numbers from the United States hammered global markets into new lows this week. On Friday morning, the Bureau of Labor Statistics released its monthly unemployment report showing that US unemployment rose 0.1% last month to 8.2%. During the last month, the US economy only added 69,000 new jobs, less than half of economists' expectations. Continued negative news out of Europe and poor manufacturing data out of China further discouraged investors, causing them to flee from stocks, commodities and most foreign currencies.

Energy markets led the way lower, with natural gas sinking thirty cents per million British thermal units to $2.32 (-11%) and crude oil collapsing over $7 per barrel (-8.1%) to $83.50. Weak petroleum prices pulled gasoline down as well, with the fuel futures falling nearly 20 cents per gallon. The S&P 500 (-2.2% to 1285), copper (-3.4% to $3.33 per pound) and the euro currency (-1% to $1.24) all fell this week, showing general pessimism toward the global economy.

As they sold most assets, investors flocked to US Treasury Bonds, which rose to an all-time high price on Friday morning. Likewise, gold exploded higher, rising as investors dumped nearly all other commodities. As of midday Friday, gold for June delivery was trading at $1615 per ounce, up $45 per ounce (+2.9%) on the week.

Hogs Hurdle Higher

Hog prices were sharply higher this week, rising 5.3 cents (+6.2%) to 90.5 cents per pound, looking especially strong in light of the general commodity selloff. The rally came at a bad time for consumers, as the price rise coincided with the beginning of the summer grilling season.

News also broke this week that 500,000 hogs would be exterminated in Chile due to health concerns. Last year, Chile was the 9th-largest supplier of pork to the United States. While the half million hog loss in Chile pales in comparison to the U.S. total herd size of nearly 65 million swine, even a small disruption in the global meat supply can have wide-ranging impacts.



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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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