Gold charged to a two-month high this week, fueled by help from the Federal Reserve.
Gold’s rally started shortly after Fed chair Janet Yellen indicated the Fed was likely to continue holding interest rates near record lows. Some market watchers had been expecting the Fed to start raising rates soon to head off inflationary risk.
While the U.S. is not experiencing rapid inflation at this time, there are increasing concerns the large-scale monetary stimulus and low interest rates could lead to higher inflation levels in the coming months. In an inflationary environment, the U.S. dollar loses its value relative to other assets, like gold, which investors bought aggressively after Yellen’s speech Wednesday.
Meanwhile, ongoing military conflicts in Ukraine and Iraq threaten global stability, which can encourage some investors to hold gold in lieu of other investments. Furthermore, when prices broke higher than $1,300 per ounce, more buyers flocked to the market, pushing prices higher yet.
By midday Friday, gold had clamored to $1,317 per ounce, giving gold its best week since early March.
Gasoline Market Turbocharged
Gasoline prices hit an 11-month high this week, gaining more than 7 cents per gallon. The primary driver behind the rally has been the deepening conflict in Iraq, which caused the international price of crude oil to rally again this week, topping out over $115 per barrel. Domestic crude oil prices have been partially sheltered from the conflict, trading Friday near $106, but many U.S. refineries purchase oil based on global prices, meaning that international conflicts can fuel a jump in prices at the pump.
On midday Friday, gasoline futures were trading for $3.09 per gallon, a price that represents wholesale value, without taxes or other charges included.
Cattle Go for Wild Ride
Cattle prices gyrated wildly this week, hitting exchange-designated daily limits twice as traders prepared for the USDA’s monthly Cattle on Feed report, which is released on Friday after the market closes. The report was expected to show a moderately shrinking national herd during the month of May, but any significant deviations could cause more fireworks when the market reopens on Monday morning.
Most cattle contracts finished lower on the week, with August feeder cattle trading Friday for $2.06 per pound, while August live (fed) cattle were worth $1.46.
Opinions are solely the writer's. Walt Breitinger is a commodity futures broker in Valparaiso. 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.