Gold Can't Get Off the Mat

Gold prices fell sharply this week, dropping by as much as $113 per ounce (-8.7%) by Friday morning. Prices have been in a near free-fall since a Federal Reserve announcement implying that stimulus is coming to an end.

On Friday, a Fed official hinted that stimulus may cut back as soon as September, further weakening the gold market. Fed stimulus was a major factor behind the yellow metal's rally from 2008-2012, and the waning stimulus is having the opposite effect, driving prices lower. Some analysts also attributed this week's quick sell-off to US economic data, such as rebounding consumer spending, stronger consumer sentiment and exceptional pending home sales. A stronger US economy can discourage would-be gold buyers, who focus instead on real estate and stocks for investing purposes.

As of midday Friday, gold for August delivery was trading at $1224, near the lowest price since the end of 2010.

USDA Report Crushes Grains

A USDA report released Friday morning showed that US corn farmers were able to plant 97.4 million acres, a drastic increase from expectations. If the crop develops as expected, this crop would be the largest in US history. As the news broke, prices plummeted, with December corn falling as low as $5.11 per bushel, the lowest price for that market since 2011.

Similarly, the USDA raised its estimate of planted soybean and wheat acreage, which contributed to declines in those markets as well. With the acreage report behind them, farmers, end users and traders will quickly shift attention to the weather, which could drastically affect crop yields, especially for corn.

Natural Gas Gouged

Natural gas prices plummeted to a three-month low on Friday, falling as low as $3.53 per million British thermal units. Gas inventories are climbing as production continues in the face of weaker-than-expected demand.

In summer months, a primary source of demand for natural gas is electricity generation, but this summer has been cool across the eastern half of the country, reducing air conditioning demand. By the end of the week, natural gas for August delivery was down 23 cents (-6.1%).

Many traders note that the weather could turn, giving support to the market. Should hotter temperatures prevail or if there is a hurricane-driven supply disruption in the Gulf of Mexico, prices could rally sharply.