The Cash Index for gold hit a new all-time high of $3,027.29 overnight through early Tuesday, outshining the rest of the commodity complex.
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In other news, the US Federal Open Market Committee's 2-day meeting gets underway Tuesday, with the market showing no change in the Fed Fund rate at Wednesday's conclusion.
The Barchart Brief: Your FREE insider update on the biggest news stories and investing trends, delivered midday In the Grains sector, the spotlight has turned back to commercial in the old-crop corn market the past two months, as indicated by the May-July futures spread.
Morning Summary: It has been a busy month so far. Things got rolling, literally, with the Goldman Roll from Friday, March 7 through Thursday, March 13. This was immediately followed by Pi{e} Day on Friday the 14th that led into the Ides of March on the 15th and St. Patrick’s Day on Monday just passed. Now, while we are putting away the green for another year and recovering from the effects of imbibing rounds of Guiness and Jamesons, next up is the 2-day US Federal Open Market Committee meeting. As usual, this meeting will culminate with Chairman Powell making an announcement on US interest rates, with the Fed fund futures (ZQK25) forward curve still showing no change until at least the June meeting. As for markets early Tuesday morning the US dollar is dollar index is slightly weaker, down 0.05 pre-dawn. Crude oil was higher, adding as much as $0.92 to Monday’s opening rally of $0.40. All eyes are on Gold, again, with both the Cash Index (GCY00) and futures market well above the big round number $3,000. I still find it interesting how CFTC Commitments of Traders reports have shown a continued decrease in Watson’s net-long futures position while total open interest continues to increase.
Corn: The corn market was quietly in the red early Tuesday morning. Recall from yesterday’s Afternoon Commentary how corn closed in the green, but a lack of bullish conviction had contracts well off session highs as traders headed to the pub for a pint (or three). Overnight trade saw May lose as much as 3.25 cents and was sitting on its session low at this writing, while registering fewer than 15,000 contracts changing hands. For those keeping track, this dropped May back below $4.60 while the July issue has slipped under $4.70 once gain. Speaking of which, one of the more interesting aspects of the corn market is the old-crop May-July futures spread. Monday’s close was at 9.0 cents carry, unchanged for the day, and covering 42% calculated full commercial carry. On Friday, January 24, the week of the most recent US presidential inauguration, this same spread closed at a carry of 1.0 cent and covered a mere 5%. Much has happened in the eight weeks since. As for basis, the National Corn Index ($CNCI) came in near $4.2675 Monday evening, up 3.0 cents for the day and sitting 34.25 cents under May futures. Last Friday’s basis calculation came in at 34.5 cents under May.
Soybeans: It was more of the same in the soybean market early Tuesday morning as both the May and July issues were sitting at unchanged on negligible trade volume. The May issue posted a 4.0-cent trading range, from up 2.75 cents to down 1.25 cents and registered less than 6,500 contracts traded. It was a similar story for July as the issue showed a trading range of 4.0 cents with fewer than 2,500 contracts changing hands. I was asked Monday evening why the large discrepancy in volatility between corn and soybeans, and I’ll put some analysis together on the subject. For the record, implied volatility of May soybeans was sitting at 16% early Tuesday morning while May corn was showing 24%. My Blink reaction[i] to the question is the soybean market lost global demand a number of years ago – 2018 if I recall – while corn is in the process of doing the same thing now. But I know there’s more to it than that. Fundamentally the soybean market is going nowhere fast. The May-July futures spread closed Monday at a carry of 13.75 cents and covered 50% calculated full commercial carry. National average basis was calculated at 64.25 cents under May futures Monday evening, unchanged from last Friday’s final figure.
Wheat: The wheat sub-sector was much quieter than what I talked about 24 hours ago. Early Tuesday morning finds all three markets showing fractional changes on mixed trade volume. What stands out to me is May HRS had registered 1,400 contracts changing hands, indicating solid overnight activity for spring wheat, with July close behind at 1,100 contracts. Both issues were sitting fractionally higher at this writing. You’ll recall HRW spent Monday in the spotlight after temperatures dropped below freezing over parts of the US Southern Plains this past weekend. However, Monday’s strong double-digit rally looked to be led by short-covering from Watson as opposed to aggressive buying from commercial traders. The new-crop HRW July-September spread still closed yesterday at a carry of 13.0 cents and covered 78% calculated full commercial carry. Yes this is less than the close from March 4 when the spread finished at a carry of 15.75 cents and covered a whopping 98%. Also yes, though, the spread still shows a bearish commercial outlook. Over in SRW we see contracts fractionally lower to start the day. Here, the old-crop May issue registered only 5,000 contracts traded through the pre-dawn hours with July at 1,500 contracts. Speaking of new-crop, the July-September spread covered a bearish 74% at Monday’s close.
[i] Based on the theme of Malcolm Gladwell’s book “Blink” that tells us our first thought is usually correct, before we spend time talking ourselves out of it.
