Written by Sumit Roy  |

August 22, 2011

Market Wrap: Gold Hits Record ($1895), Platinum Hits 3-Yr High, Oil Little Changed Despite Libya Success

Details

Most commodities are higher as gold, silver and platinum continue to surge.

Commodities were mixed today as traders continued to grapple with the same factors as last week — the economy and the sovereign debt crisis in Europe. But a lack of major news meant the outlook remained more or less unchanged, with investors still extremely jittery.

Though it's still several days away, markets are looking toward Fed Chairman Ben Bernanke's speech in Jackson Hole, Wyo., scheduled for 10 a.m. EDT on Friday. Some are drawing parallels to last year's Jackson Hole speech in which Bernanke first indicated the Fed was set to unleash its second quantitative easing program (QE2). The speculation is that he may use this year's speech to set the stage for QE3.

But that is far from the consensus. Most markets participants do not believe QE3 is forthcoming anytime soon. Thus, commodities may continue to take their cues from the evolution of the economic data and movements in European sovereign debt markets.

Speaking of those European markets, the European Central Bank said it settled €14.29 billion ($20.57 billion) worth of sovereign bonds last week, down from €22 billion the week before. Italian and Spanish 10-year bonds yields remained remarkably stable at recent levels, below 5 percent after the news.

Though there were no new catalysts, precious metals continued to surge today thanks to unrelenting investor appetite and strong upside momentum. Gold hit a fresh record high of $1894.80/oz before last trading near $1890.15, up 2.05 percent on the session.

Silver added 1.46 percent to $43.54 after earlier hitting $44.06 — its richest level since May 3. Platinum also rose by 1.47 percent to $1902.75; earlier, it hit $1904.50 — the best level since July 2008.

News that Gadhafi's reign in Libya was coming close to an end didn't have a major impact on crude oil prices. Market reaction is muted thus far because even after Gadhafi falls from power, it is unknown how long it will take Libya to resume its production of 1.55 mmbbl/d of crude. Potential damage to infrastructure, internal discord among rebels and a host of other possibilities means that it will likely be many months, if not years, before production resumes.

WTI added $1.86, or 2.26 percent, to last trade at $84.12/bbl, while Brent shed $0.51, or 0.47 percent, to last trade at $108.11.

Copper was a laggard today. The metal fell 0.67 percent to $3.97/lb on COMEX. "The market is stuck in a range and I wouldn't expect a dramatic pullback from here unless there is another sovereign downgrade or default. By the start of next month, we are likely to go back to more fundamental-based trading," said Andrey Kryuchenkov, an analyst at VTB Capital.

The agricultural complex rose, with wheat hitting a two-month high. Prices for the grain were last trading at $7.36/bushel, up 0.65 percent. Corn was at $7.21, up 1.34 percent and soybeans were up 1.23 percent to $13.77. "The disappointing U.S. spring-wheat crop and feared delays to winter-wheat planting in the Great Plains because of drought are the top issues on the U.S. wheat market at present," said Carsten Fritsch, an analyst at Commerzbank AG.