If you follow our posts on commodityworldnews.com you will see there is a new demand pressure on the gold and silver market. An asian marketplace has opened in 2011 and last friday small futures contracts for gold and silver became available through 350 million Bank of China savings accounts. Anyone with a Bank of China savings account has access to these 10 oz gold future contracts. The exchange is located in Southwest China, the video is available in my previous post. Due to this development and the massive bailouts about to happen in Europe, gold and silver will continue to go up. Corporate earnings are coming out next week, and if US earnings numbers come out poor, the prices of commodities will retreat (with the exception of copper and nickel as monetary metals.) If earnings come out neutral or positive, it will be a matter of time before they will be bad, and when that happens commodity prices will fall hard.
Another downward pressure on a segment of commodities, underreported but discussed in a previous post, is the incredibly great growing season in the Northeast and Midwest for farms. Due to record high prices in April and May reports are in that US farmers planted the most combined acreage for corn, wheat, rice, and soybeans ever, and the weather has been PERFECT FOR GROWING. If there are no anomalies the rest of the season, a bumper harvest in everything planted. I see firsthand effects of this in my landscaping business, bushes and gardens in full sun are growing at surprising rates. I am going to trim certain full sun hedges four times this year, that I previously trimmed only twice a year. And because the farmland east of the mississippi is the best producing farmland in the world, the growth rates this year will keep world food prices from rising above $6.50 per 60 lbs for corn or spring wheat. We have had the hottest season in 100 years east of the mississippi in 2010, and the rainiest year in 100 years in 2009. Now we will have one of the best growing seasons in a 100 years. Also, with the good harvest, farmers will be able to buy large new equipment and prepare more land for next year, keeping food prices in check and farms profitable.
In the short and intermediate term prices of everything but food prices will inflate upward. When corporate earnings turn south this quarter or next year, commodity indexes will be cut in half from their highs while only monetary metals will continue way up. Stock prices will follow the commodity indexes down by half. But the Dow Jones and S&P (priced in dollars, not gold) could hit new highs with all the government bailouts and liquidity infusions before this happens. The only thing moving sharply up now is monetary metals (best bets are gold and silver) Food prices may fall sharply when the harvest numbers come in and there is a report of growth in China slowing at the same. This could happen anytime between now and October. Click on one ad while you're here if you like my posts, to keep me going.
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