Futures File

April 7, 2017

Gold Cruises Higher on Syrian Strike  

Gold and silver exploded on the news of Thursday night’s massive missile attack on a Syrian air base. Speculators and investors, recently enamored and enriched by precious metals, scrambled to buy more of the asset group which typically outperforms during periods of uncertainty, inflation, and military conflicts, all of which converged this week. Gold and silver blew over highs not seen since early November, trading Friday for $1275 and $18.35 per ounce, respectively.

Though many traders are hoping for a dip to buy as military news subsides, others are looking at the long-term inflationary effects of government spending on further military build-up, stimulating manufacturing, and building the wall with Mexico.

Further encouraging gold buyers are tight employment, rising wages, and a promise from the administration that income taxes will be lowered. The doubling of crude oil prices during the past 14 months adds fuel to the fire and causes “gold bugs” to wonder if precious metals could do the same!

 

Lumber Booms

Lumber futures rattled higher this week, splintering a multiyear price record. The market has been prospering as investors grow more confident about the U.S. economy. Homebuilding, infrastructure spending, and general economic growth all contribute to demand for lumber, and traders are sensing that prices are too cheap to keep up with demand.

This led to a shattering rally, with lumber climbing by the Chicago Mercantile Exchange’s daily price limit of $10 per thousand board feet on both Thursday and Friday. This signals pent up demand that could take lumber significantly over $400 for the first time since the 2005 when the market was booming alongside the U.S. housing industry.

 

Farmers Need Sunshine

After the bout of warm weather in February, many Midwestern farmers were hoping to get an early start to planting this year’s corn and soybean crops.

Unfortunately, cold temperatures, snow, and rain over the last month have kept many producers from being able to prepare their fields. Muddy conditions make it difficult to navigate fields, while rain can wash away expensive fertilizers, herbicides, and pesticides.

Despite the annoyance of the delays, some producers are happy for the moisture. Recent rains have alleviated drought concerns in Missouri, Kansas, Illinois and Iowa.

However, if wet weather sticks around too long, farmers can get far behind schedule, which can trigger market fears about crop yield losses, sparking price rallies.

For over 18 years, Walt taught his method of trading at Purdue University. His comments on the markets have been featured in USA Today and other national outlets.

Walt's weekly commentary has been published for nearly 25 years. Futures File, written on Fridays for Saturday publication, provides a brief summary of commodity futures market highlights for the week.