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Paragon Commentary

Futures File: Hurricane Harvey, Soybeans & Gold

Aug 25, 2017

Hurricane Harvey Hits Texas

On Thursday, the National Weather Service reported Tropical Storm Harvey had quickly developed into a major hurricane and was aiming for Texas.

Expected to reach Category 3, Harvey could be the worst storm to threaten Texas in decades, posing a grave risk to millions of people and homes. The storm could also damage or shut down oil rigs and refineries on the Gulf Coast and inland where the storm was projected to hit land. 

As traders watched projections predicting winds exceeding 125 miles per hour and flooding caused by up to three feet of rain, the price of unleaded gasoline blasted upward by more than 15 cents per gallon on fears of supply disruption. Texas has more oil refineries than any other state, making up about a third of total U.S. refining capacity.

Additionally, commodities markets are bracing for a substantial rebuilding effort, pushing lumber prices over $380 per thousand board feet ahead of the storm.

 

Soybeans Sail on Export Demand

Even though the USDA recently projected a 49.4 bushel per acre national average soybean yield and record size bean crop, large exports to China and elsewhere helped prop up prices early in the week.

Though some deals were cancelled, thoughts that China could increase U.S. bean imports for livestock feed helped fuel a rally in America’s high-protein crop, helping November soybean prices recover to a two-week high near $9.47 on Friday.

 

Gold Could Eclipse $1300 per Ounce

Amid international saber rattling, political discord, and a weak U.S. dollar, gold prices have increased 12% since the beginning of 2017, outpacing Treasury bonds and the stock market.

Debate over the federal debt ceiling could increase financial fears and threaten the value of paper assets, boosting gold. Metals are also gaining ground as a hedge against trouble on ongoing fears of the escalation of military threats with North Korea and other global hotspots.

On Friday morning gold prices had wild swings up and down as reports emerged from the economic conference in Jackson Hole, WY regarding the Federal Reserve’s policy on interest rates. Lower interest rates typically stoke inflation and boost gold prices.

As of midday Friday, gold continued to flirt with the $1300 per ounce barrier which, if broken, could send gold much higher as buyers add to winning bets.

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