More Gas, Lower Prices

Lower natural gas prices should provide a break for homeowners and industrial users, such as fertilizer producers or electricity generators. The mild, somewhat warm winter so far has left both the U.S and European storage much larger than had been expected. The war in Ukraine along with the anticipated Russian gas supplies shut-off have had surprising effects. There have been substantial conservation efforts and worldwide attempts to increase production and storage in preparation for shortages, but they never occurred. Gas has crashed from a high of $10 per thousand BTUs during the peak of panic buying to a low this week below $3.25. The savings to the consumer may not reflect such a dramatic decline, but the overall trend is noticeable. Regrettably for auto drivers, unleaded gasoline has been increasing sharply since a low in December.

Why Is Gold So Strong?

The foundation of the current trend in gold began with a $300 rally in the wake of the Russian invasion of Ukraine. Central banks, including the People’s Bank of China, have been buying tons of gold, indicating a move away from the U.S. dollar. Other factors are often cited, including a waning interest in cryptocurrencies, which could be shifting capital from both “flight-to-quality” and “alternative” investments toward gold just as fears of recession are weighing on the stock market. The chance of inflation continuing or rising even faster remains debated. Many analysts forecast that inflation will soon fizzle out and even decline.

The “demographics” of gold may also be playing a major role. Although China’s population is currently the largest on Earth, India is set to surpass China this year. These two major gold holders have populations exceeding 1.4 billion each, with India joining the world’s fastest growing economies. Indians have historically trusted and chosen precious metals as their favorite investment medium to store their wealth. Their per capita expenditures on jewelry is also a major factor. India’s exports are destined for the United States, while they mainly import from China.

Words of Wisdom

Golden Rule of Investors: He who owns the gold makes the rules. Golden Rule of Farmers: You can’t eat money.

Weekly Winners and Losers

Winners include gold at $1,931 per ounce, copper going for $4.26 per pound and gasoline traded at $2.650 per gallon, with cotton fetching .8676 per pound. The biggest losers were natural gas at $3.16 per MMBtu, soybeans closed at $15.09 per bushel and soybean meal trading at $464 per ton. Corn, wheat, cattle and hogs were rangebound, making little progress either up or down.