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Paragon Commentary

Futures File: Gold, Hogs & Oil

Jul 19, 2019

Metals Heat Up

Gold and silver are shining as investors rush into the precious metals. Gold reached a six-year high this week, topping $1450 per ounce.

This golden rally has been inspired by investors concerned about falling interest rates, currency devaluation, rising inflation, and stock prices at all-time highs. Global geopolitical tensions are also helping boost demand for the metal, as it is seen as a “safe haven investment” in times of trouble.

While silver has been climbing as well, it has attained only a one-year high at $16.50 per ounce. This has resulted in one ounce of gold being worth nearly 90 ounces of silver, the highest ratio since 1993.

For some investors, this makes “poor man’s gold” look like a relative bargain, as silver is usually worth much more compared to gold.

 

Pork Starts to Sizzle

Hog prices reached a one-month high on Friday, trading over 84 cents per pound. Prices are climbing on renewed expectations that China will need to buy more U.S. pork as it continues to struggle with the African swine fever outbreak that has led to the death of over 10 million of hogs during the last year.

Death from disease, preventative culling, and restrictions on animal transport are creating market shortages and could lead to more Chinese demand.

The ongoing trade war with China has hampered purchases, but some headway on a deal was made this week, helping to boost markets on Friday.

 

Oil Glides Lower

Oil prices fell every day this week, dropping from an eight-week high to a one-month low as former oil bulls bailed out of the market.

Prices fell as U.S. oil producers in the Gulf of Mexico came back online after Hurricane Barry left production largely unscathed. Without the supply threat, the market drilled lower as it assessed the otherwise large U.S. oil supplies and production.

By Friday, oil was worth $55.50, despite new threats in the Middle East.

President Trump announced Thursday that the U.S. Navy shot down an Iranian drone, a claim that Iran denies. A simmering conflict with Iran threatens to shut down the flow of oil from the Middle East, which could send prices sky-high, but this week’s action suggests that oil traders think that current fears are overhyped.

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