Written by Sumit Roy  |

December 12, 2011

Market Wrap: Gold ($1666) Plunges Amid Renewed Eurozone Worries, Brent Falls To $107

Details

Bears took control of financial markets today.

Renewed concerns about the eurozone sovereign debt crisis are pushing commodities and stocks lower on this first trading day of the week. While last Friday's EU Summit was a victory for the likes of Germany — which is a key advocate for stronger fiscal integration between member countries — it did little to address the immediate default fears that have been spooking markets.

On the positive side, EU national central banks will add €200 billion ($267 billion) to the International Monetary Fund, so it can then provide aid to struggling countries. But that hasn't appeased markets, which were disappointed by last week's comments from ECB President Mario Draghi, who said that the central bank would not step in more aggressively than it already has to purchase sovereign debt.

Indeed, the ECB bought a paltry €635 million worth of sovereign bonds last week — the smallest amount since the central bank resumed its securities purchase program back in August.

Italian and Spanish 10-year bond yields are back on the rise and were last trading up by 20 basis points and 4 basis points, respectively, to 6.56 percent and 5.79 percent. The respective euro-era records for those yields are 7.47 percent and 6.78 percent.

Meanwhile, Italy successfully sold €7 billion ($9.4 billion) of one-year bonds. The country paid an interest rate of 5.92 percent, down from a record 6.08 percent for a similar auction last month.

• Precious metals tumbled today amid risk aversion and a 1.27 percent rally in the U.S. Dollar Index to 79.63. "...the next couple of days are going to be crucial technically for gold. Last week we were up at $1760 and we have now lost $80 fairly quickly, that shows that rallies are difficult to sustain in this sort of environment," said Robin Bhar, an analyst at Credit Agricole.
  
  Gold was last trading down by $46, or 2.69 percent, to $1665.60/oz, while silver shed $1.04, or 3.23 percent, to $31.18. Platinum fell by $30, or 1.98 percent, to $1485, and palladium lost $27.25, or 3.98 percent, to $658.25.
  
  
• Crude oil fell amid today's macro worries, with Brent last trading lower by $1.15, or 1.06 percent, to $107.47/bbl, while WTI fell by $1.45, or 1.46 percent, to $97.96. This week features an OPEC meeting on Wednesday. The cartel is not expected to reduce official production quotas, though some members such as Iran are calling for a cut in output in response to rising production in Libya.
  
  
• The broader weakness in commodities helped to push copper down by $0.09, or 2.61 percent, to $3.45/lb. "Europe is the key drag on consumption," said Song Seng Wun, an economist at CIMB Research Pte. "It's still a cautious demand story, both domestically in China and what's happening in the global markets."
  
  
• Grains saw a minor bounceback from multimonth lows in today's session, but last week's bearish supply and demand projections from the USDA weighed. Corn was last trading fractionally higher to $5.87/bushel, while soybeans rose by $0.06, or 0.5 percent, to $11.13, and wheat rallied by $0.04, or 0.61 percent, to $5.77.