Gold and silver prices explode on inflation prospects

Washington (Jan 26)  A report that Federal Reserve officials are close to ending their reduction of U.S. bond holdings stimulated a run on gold and silver because of its inflationary implications. More political drama in Washington, including the Russia investigation and hopes for a solution to the shutdown caused metals traders to become further emboldened.

The U.S. dollar tumbled sharply on Friday, another related factor, feeding the hungry gold bugs. Gold for February delivery blasted up to $1299.8 per ounce by midday Friday while silver streaked up to $15.70 per ounce. Copper prices also rose sharply to $2.72 per pound.

Stampede into stock index futures

Even though gold and the stock market have, historically, traveled in opposite direction, this week’s Fed Reserve story, progress on the shut-down talks, and reports of better corporate earnings fueled strong buying in the S & P and Dow stock index futures along with the metals. Both indexes spiked upward to the highest levels since mid-December. Treasury bond prices which move opposite of the stock market, slid sharply.

Reports that next week’s U.S. and China trade talks could be extended and result in a grain deal gave a kick to bean prices. The rumored deal might include annual imports of $30 billion dollars of U.S. Ag products including soybeans, corn, wheat, ethanol, and pork. Chatter that Russia could restrict wheat exports helped that market rally at week’s end also.

Hot, dry weather in South Africa helped boost corn prices as corn plantings there may be down as much 40% in that country. Chinese government seeking better quality corn helped prices as well.

March beans traded at $9.21 midday Friday while corn brought $3.78 per bushel.

Opinions are solely the writers’. Walt & Alex Breitinger are commodity futures brokers in Valparaiso, Ind. They 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.

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