‘Fire and Fury’ unleashed on gold & stocks

A war of words between President Trump and North Korean leader Kim Jong-un spooked global investors last week.

On Tuesday, President Trump warned that the United States would unleash “fire and fury” on North Korea if it made further threats on the United States. Kim Jong-un responded by threatening to bomb the U.S. island of Guam.

On Friday morning, President Trump doubled down, stating that the U.S. has prepared military solutions and are “locked and ready.” Secretary of Defense Mattis has also voiced warnings to North Korea while many other prominent U.S. politicians and world leaders have asked that both the U.S. and North Korea deescalate the rhetoric.

Fears that a nuclear war could break out sparked investors to buy gold, an asset seen as a safe haven in times of trouble, pushing that market to a two-month high at $1291 per ounce on Friday. Meanwhile, traders sold stocks, knocking the S&P 500 to a one-month low in a fierce collapse after that market made an all-time high on Tuesday morning.

Everyone will remain on edge as politicians, diplomats, and militaries posture in the coming weeks, making markets more prone to large swings.

Grains drop on rosy outlook

Corn, wheat, oats, and soybeans collapsed on Thursday after a USDA forecast for larger-than-expected crops this year. Dry weather in the Midwest had many market watchers fearing significant crop losses, but the USDA projected bumper crops.

The USDA increased the size of the soybean crop to a record 4.381 billion bushels and forecast the corn crop size at 15.2 billion, a near record.

This news sent the grain markets in a downward spiral, with soybean and wheat prices reaching six-week lows. Meanwhile, the value of this fall’s corn crop collapsed to an 11-month low near $3.70 per bushel.

Many producers and investors are skeptical that the final harvests will match the USDA’s current outlook, which could result in a rally in the coming months if the crops end up being smaller. For now, the price reflects a large surplus of grain and another tough year for farmers who didn’t hedge during the past few months when prices were higher.

Opinions are solely those of the writers. Walt & Alex Breitinger are commodity futures brokers with Paragon Investments in Silver Lake, KS.