Written by Sumit Roy  |

October 27, 2011

Market Wrap: Silver ($35.23) Surges, Drags Gold ($1747) Higher; Oil, Copper Spike After EU Deal, GDP Data

Details

It was all good news for financial markets today.

Risk assets surged today after European policymakers finally agreed to a comprehensive solution to the sovereign debt crisis in the region. Strong GDP data in the U.S. also provided support. The S&P 500 stock index spiked higher by almost 4 percent to trade at its best levels since Aug. 1.

The details of the EU plan didn't contain any major surprises, keeping to the framework outlined over the past few weeks. Greece's debt will be reduced by 50 percent (up from 21 percent before); European banks will raise €106 billion in capital; and the European Financial Stability Facility (bailout fund) will be leveraged to provide €1 trillion in potential support (up from €440 billion before). Another bailout fund that complements the EFSF may be created with capital from China and others.

Meanwhile, the Bureau of Economic Analysis reported that the United States economy grew by 2.5 percent annualized in the third quarter, equal to expectations, but up from the 1.3 percent rate in the second quarter. While not booming, the latest figures suggest that the world's largest economy is far from a recession, as had been feared only weeks ago.

Italian and Spanish 10-year bond yields fell after these latest developments, with the former down 5 basis points to 5.87 percent, while the latter fell 15 basis points to 5.33 percent. The U.S. Dollar index plunged 1.79 percent to 74.88 — its lowest level since Sept. 6.

• Gold rose today due to  strong rallies in silver, platinum and palladium. A brighter economic outlook means that industrial and jewelry fabrication demand may be stronger than expected. Overall, the precious metals sector is keeping with the script we outlined in our latest Precious Metals Monitor.  
  
  Gold was last trading higher by $22.15, or 1.28 percent, to $1746.97/oz, while silver surged by $1.84, or 5.52 percent, to $35.23. Platinum added $43, or 2.69 percent, to $1639 and palladium advanced by $21, or 3.24 percent, to $669.50.
  
  
• Crude oil was higher today amid the general upbeat mood in markets, with Brent up $3.16, or 2.9 percent, to $112.07/bbl and WTI higher by $3.66, or 4.06 percent, to $93.86. Prices for Brent may quickly advance near the key $115 resistance level now that the Europe saga is (at least temporarily) over. A break above that level exposes the next resistance levels at $120 and $127.
  
  
• Copper surged to a one-month high, jumping $0.20, or 5.76 percent, to $3.69/lb on COMEX.
  
  
• The broad rally in financial markets spilled over into grains, which were all higher. Corn was last trading up by $0.15, or 2.39 percent, to $6.53/bushel, while soybeans added $0.27, or 2.25 percent, to $12.38, and wheat gained $0.25, or 3.95 percent, to $6.44.
  
  "We've seen a bit of demand coming into markets at these levels across the board for grains, largely driven out of Asia and the Middle East," said Michael Pitts, commodity sales director at National Australia Bank.