Written by Sumit Roy  |

November 21, 2011

Market Wrap: Gold Plunges To $1680, Oil Falls, Corn Sinks Below $6 Amid U.S., Europe Debt Worries

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As if Europe's sovereign debt worries weren't enough, U.S. debt worries resurface.

Risk asset prices fell today as both commodities and stocks lost ground. Two worries are weighing on investors' minds. The first is, of course, the ongoing sovereign debt crisis in Europe. Yields on 10-year Italian and Spanish bonds remain elevated and were last trading up 2 basis points and 17 basis points, respectively, to 6.66 percent and 6.55 percent.

But to make matters worse, U.S. sovereign debt problems are back on the radar. The congressional debt committee that was formed during a last-minute compromise to raise the debt ceiling back in August — and which was charged with finding between $1.2 trillion and $1.5 trillion in budget savings — may fail to reach a bipartisan compromise.

The deadline is Thanksgiving. Without a deal, $1.2 trillion in automatic spending cuts, evenly divided between defense and non-defense spending, will go into effect at the start of 2013. The repeated failure of the U.S. government to address the country's spiraling debt load is likely to renew credit-rating-downgrade fears and weigh on market confidence.

In economic news, existing home sales in the U.S. for October totaled 4.97 million units, better than the 4.8 million that was expected and the 4.9 million of September.

The European Central Bank purchased €7.9 billion worth of sovereign bonds last week, up from €4.5 billion the week before.

Meanwhile, the U.S. Dollar Index rallied 0.22 percent to 78.23, putting it at a six-week high.

• Gold fell as low as $1667.03/oz today, falling to the lowest levels in almost a month. Steep declines in silver, platinum and palladium over the past week have dragged gold lower as the yellow metal struggles to regain its safe-haven status. Nevertheless, analysts at Commerzbank believe that "further downside potential for gold prices is likely to be limited." The broker forecasts that gold "will be trading at $1800 ... by year's end."
  
  Gold was last trading down by $44.60, or 2.59 percent, to $1679.35, while silver lost $0.93, or 2.88 percent, to $31.43. Platinum fell $43.75, or 2.74 percent, to $1551.50 and palladium shed $12.25, or 2.03 percent, to $590.50.
  
  
• Crude oil prices fell amid the aforementioned macroeconomic worries. The spread between WTI and Brent continued to hold at recent low levels near $10. As for the glut of crude oil in the U.S. Midwest, "you need a lot more pipelines to really alleviate the problem," said Amrita Sen, an analyst at Barclays. "It's one pipeline that's been reversed and if you look at the other pipeline projects that were supposed to come online, they've all been cancelled."
  
  Brent was last trading lower by $0.83, or 0.77 percent, to $106.73, while WTI fell by $0.65, or 0.67 percent, to $96.76. That puts the spread between the benchmarks at $9.97.
  
  
• Broad-based selling sent copper $0.10, or 3.03 percent, lower to $3.30/lb on COMEX.
  
  
• The grain sector was weaker today, with corn last trading down by $0.11, or 1.84 percent, to $5.99/bushel, while soybeans fell $0.23, or 1.93 percent, to $11.46, and wheat shed $0.06, or 1.04 percent, to $5.92.
  
  "While domestic demand for corn is strong, exports have been pretty weak," said grains analyst Don Roose of U.S. Commodities.