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Gold Melts on China Fears

Register • Apr 21, 2014 at 11:54 AM

Gold prices plunged this week, falling over $40 per ounce during the day Tuesday, the largest sell-off this year. Prices sank after poor economic news from China indicated that gold demand may be waning there. China was the world’s largest gold consumer in 2013, driven primarily by individuals’ purchases; in a slower economic environment, consumers may not be able to continue accumulating gold, which could hurt global demand.

On Thursday, when the market shut down early for the Good Friday holiday, gold prices had declined to $1295 per ounce, the lowest price in two weeks.

Wheat Works Higher

Wheat prices bounced this week following bullish news out of Ukraine and the US Great Plains.

In Ukraine, tensions continued to rise as the Ukrainian military attempted to oust pro-Russian militant groups. The Ukrainian campaign was largely unsuccessful, which could undermine the Ukrainian government’s credibility and bargaining power with Russia, who has tens of thousands of troops stationed on its border with Ukraine. Grain traders feared these actions would destabilize Ukraine’s ability to plant and harvest grain this year, which caused a rally in wheat prices.

Meanwhile, in the US Great Plains another bout of cold weather could threaten the winter wheat crop emerging in many fields. Winter wheat is planted in the fall, goes dormant in the winter, and emerges in the spring. Late freezes, like those that hit this week, can damage the emerging wheat, reducing crop yields, which helped boost prices this week.

On Wednesday prices for May soft red winter wheat, commonly known as Chicago wheat, topped out over $7.10 per bushel, the highest price in three weeks.

Soy Soars on Strong Demand

Soybean prices continued skyward this week, reaching the highest price since last July. Prices have been gaining on news of strong demand from domestic soybean processors.

Most US soybeans are “crushed” to separate out the soybean oil from the protein-rich soybean meal, which is used predominantly as livestock feed. High meat prices are boosting demand for soymeal. Meanwhile, soybean oil is used for a variety of applications, including human consumption and biofuel production, an industry that has grown rapidly in recent years.

Prices for soybeans and soybean meal hit all-time contract highs on Thursday, trading for $15.31 per bushel and $495 per metric ton, respectively.

Opinions are solely the writer's. Walt Breitinger is a commodity futures broker in Valparaiso, Ind.  He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

Alex Breitinger

Breitinger & Sons, a division of Paragon Investments

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