Today saw markets further their plunge as fears of a U.S. default remained in investors’ minds. As it gets closer to the August second deadline, with the government failing to make any tangible progress on the debt ceiling, investors are growing more worried, which has sent equities on a roller coaster ride over the last few weeks. As for commodities, gold saw yet another historic breakthrough today as it finished above $1,600 per ounce for the first time ever. Gold’s climb proves that investors are more comfortable seeking safe havens for the time being in the precious metals arena, as they quickly move out of equity positions to wait out the storm. In aggregate, today saw the UBS Bloomberg CMCI index finish down 7.6 points while the S&P GSCI gained roughly 5.5 suggesting that commodities were pretty mixed overall.
One of the biggest commodity winners of the day was silver, which saw an impressive performance after investors partook in a nasty equity sell-off. The downward pressure on equities comes not only from our $14+ trillion debt, but also from worries over numerous countries in the eurozone and their debt loads. Last week saw several major banks in Europe fail their respective stress tests as many investors fear that some countries will have no choice but to default in the coming months. Silver was also boosted as the euro itself lost ground to the greenback in today’s trading session, helping push a select number of commodities forward. Overall, silver gained 3.7% as it broke through the $40 per ounce barrier once more [see also Ultimate Guide To Silver Investing].
One of the biggest commodity losers was cotton, as reports of a negative outlook created significant headwinds for the fluffy commodity. While production has been down on the year, which normally boosts prices, demand is even lower, translating into more struggles for cotton. “The loss in demand that has occurred as a result of sky high prices this year and uncertain economic conditions has far outweighed any bullishness over the Texas crop woes” said Judith Ganes-Chase at J Ganes Consulting. As cotton prices slowly make their way back to earth, this commodity could be in for a rough near-term future. For the entire trading session, cotton futures fell about 3.5% further adding to the near-term weakness that investors have seen in this commodity [see also Ultimate Guide To Cotton Investing].
Disclosure: No positions at time of writing.