Gold and silver shine as dollar dives

Prospects of a U.S. government shutdown weighed on investor sentiment this week, causing them to sell U.S. Treasury Bonds and the U.S. Dollar, pushing both markets into new low ground. Over the last three months, the U.S. dollar has dropped nearly 8 percent in value as investors worldwide have been growing increasingly concerned about the magnitude of the federal debt. Our near-zero percent interest rates have hurt the dollar's value as well, as global investors prefer to hold currencies that pay higher interest rates like the European currency. The European Central Bank raised its benchmark rate Thursday 1.25 percent from a record low of 1 percent, where it had been since May 2009.

Concerns about U.S. debt levels have buoyed the precious metals markets in recent months as well, with gold and silver hitting new highs again on Friday. This week, gold reached a new record of $1475 per ounce (+3.3 percent), while silver rocketed to fresh 30-year highs at $40.54 per ounce (+7.5 percent).

The weak U.S. Dollar has also contributed to the massive rallies in other commodities, including grains, livestock and energies. Global investors and foreign governments with stronger currencies are able to buy more of our commodities as the value of the dollar falls, exaggerating price increases.

Corn careens higher

Corn leapt to new all-time highs this week at $7.73 per bushel as traders continued to worry about the low supplies of corn. The USDA released a report on Friday morning, holding their expectations for a limited supply, although most analysts had been expecting an even smaller stockpile estimate. Corn prices have risen $1.65 over the last three weeks (+27 percent).

Rising corn prices have done little to dampen demand from the ethanol industry, which consumes nearly 40 percent of the corn produced in the United States. The strong demand is in part due to bio-fuel mandates and subsidies implemented by the federal government, but high gasoline prices have also supported the ethanol (and corn) markets. With the average pump price near $3.70 per gallon, mixing ethanol into fuel remains economically viable.

As of midday Friday, corn for May delivery was trading at $7.65 per bushel, and ethanol for May delivery was near $2.71 per gallon.

Opinions are solely the writer's. Alex Breitinger is commodities broker with Breitinger & Sons LLC, a commodity futures brokerage firm in Valparaiso, IN. He can be reached at (800) 411-3888 or indianafutures.com. This is not a solicitation of any order to buy or sell any market.