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Column: China world's largest gold consumer

Breitinger

As international athletes competed this week, China came out with a different sort of prize – the Asian country was declared the world’s largest gold consumer by the World Gold Council.

The No. 1 spot has traditionally been held by India, a country where gifts of gold and silver are intertwined with the national culture and religious holidays. Rising import taxes in India recently undercut demand there, while loosening regulation has increased Chinese consumer demand.

Last year, gold prices fell $473 per ounce as global investors sold off stockpiles of the precious metal, and it seems that the ultimate buyers were overwhelmingly Chinese, as China imported a record 1,066 metric tons of gold in 2013.

Partially driven by optimistic outlooks of further Chinese buying, gold prices rose to a three-month high this week, reaching $1,330 per ounce on Tuesday.

Natural gas pushing up

As another slew of cold weather struck this week, homeowners were forced to crank up the heat yet again. This contributed to the ongoing decline in national natural gas inventories, which currently stand near 1.4 trillion cubic feet, already the lowest level in five years.

With more cold weather expected, some experts warn that the storage levels could decline below 1 trillion cubic feet, which hasn’t happened since 2003.

Despite record-breaking natural gas production levels, this winter has put a strain on supplies and pushed prices up to $6.40 per million British thermal units this week, a four-year high.

Corn

Corn emerged as a leader to the upside as continued cold weather created more demand for poultry and cattle feed. Further strength in commodities in general (like oil and metals) helped draw the attention of investors and mutual funds to it.

China plans to expand meat production, which depends heavily on U.S. corn feed, fueling export demand.

Low supplies of soybeans and frigid weather threatening wheat production added enthusiasm for the grain complex in general. Some analysts also attributed corn’s strength to the relationship between rising gasoline prices and corn-based ethanol, which can be pulled up by fuel demand.

Both last year’s harvest in storage and corn not planted yet hit the highest price in months, with March corn exceeding all prices since early October, trading Friday near $4.53 per bushel.

Walt Breitinger is a commodity futures broker in Valparaiso. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

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