Gold topped $1,000 per ounce today as investors rushed to the safety of the precious metals markets. It’s the first time that gold topped the mark since March of 2008, but the buying shows few signs of slowing at this point. Traders are increasingly wary of the financial markets, with the Dow Jones Industrial Average falling to fresh six-year lows today and threatening the October 2002 low of 7,197.
Some of that money could eventually move into the food-grade commodities, but not until they have a compelling case. Investors are less interested in investing in the possible bullish story and are more interested in the “sure thing” during this point of uncertainty. We moved a step closer to that bullish story with today’s USDA’s export sales report, but traders will likely need to see stronger dynamics.
Today’s trading was reminiscent of what we saw through much of last 2008, with grain prices following the DJIA almost tick for tick at times. Fundamentals go out the window when fear takes over and there’s plenty of fear in the financial markets right now. We shouldn’t see the scope of liquidation that we experienced last fall, as the majority of the fund money was flushed out of the market at that point. However, it would be wise to know how much downside risk you can afford and take steps via put options or minimum price contracts to limit that exposure until the financial markets stabilize again. You have to manage as if anything is possible in this emotionally driven environment.
This statement appears to sum up the financial markets quite well. It was suggestive of the state of the financial markets that, despite a "bullish story", grain and other futures prices remain weak because of the bearish macro environment.