Written by Sumit Roy  |

December 19, 2011

Morning Call: Gold Tops $1600, Silver Lags; Grains Outperform On Supply Worries

Details

The death of North Korean leader Kim Jong Il has little impact on commodity markets.

IN TODAY'S HEADLINES ...

• With less than a week left until the Christmas holiday, news flow is light and volume is thin. Overnight, it was reported that North Korean leader Kim Jong Il had died. That led to losses in Asian equity markets as traders worried about the transition of power in a country that is technically still at war with neighboring South Korea and that has tested nuclear weapons in the past.  
  
  Nevertheless, the reaction outside of Asia has been much more muted. Commodities and stocks are mostly higher on bargain hunting, but prices remain in a range, with fluctuations based on the latest developments in the eurozone sovereign debt crisis, punctuated by the occasional economic data from the United States or China.
  
  Italian 10-year bond yields were last trading up by 19 basis points to 6.78 percent after reaching as high as 7.07 percent earlier. Spanish 10-year bond yields fell by 18 basis points to 5.12 percent.
  
  The U.S. Dollar Index was little changed at 80.24.
  ECB President Draghi Warns on Eurozone Breakup
  
  
• Precious metals are mixed as gold attempts to climb above the $1600/oz mark, while silver drops near $29. "[A stronger dollar] is likely to weigh upon gold prices in the absence of strong physical demand over the remaining weeks of the year," said Suki Cooper, an analyst at Barclays. "Longer term, gold still possesses structural pillars of support in an environment of negative real interest rates and rising inflationary pressures, as well as continued central bank buying."
  
  The yellow metal was last trading up by $8.68, or 0.54 percent, to $1607.63, while silver fell by $0.42, or 1.41 percent, to $29.32. Platinum gained $3, or 0.21 percent, to $1422.75, and palladium inched higher by $0.75, or 0.12 percent, to $625.25.
  Gold Declines as European Debt Crisis, Kim's Death Strengthen Dollar
  
  
• Crude oil is up modestly as Brent rebounds from two-month lows set last week. The benchmark was last trading up by $0.90, or 0.87 percent, to $104.25, while WTI added $0.58, or 0.62 percent, to $94.11.
  
  "There are enough contradictory pressures on the oil market to go into the holidays with a neutral position," said Oliver Jakob, managing director at Petromatrix GmbH. "On the bearish side there is the risk of European downgrades, but there's also the risk of tougher rhetoric against Iran."
  Crude Oil Rebounds From Near Six-Week Low in New York as Equities Advance
  
  
• South American supply worries are spurring outperformance in the grains complex today as soybeans advances for a third straight session. "There is support from dry weather in South America and there could be more upside for corn because of the tight global supplies," said Lynette Tan, an analyst with Phillip Futures. "We are more bearish on wheat because of ample supplies, so there could be more downside for wheat."
  
  Corn was last trading up by $0.13, or 2.14 percent, to $5.96/bushel, while soybeans rose by $0.17, or 1.5 percent, to $11.47/bushel, and wheat rallied by $0.10, or 1.63 percent, to $5.93.
  US soy, corn firm on LatAm weather concerns
  
  
• Copper is lagging today as the industrial metal falls by $0.01, or 0.44 percent, to $3.31/lb on COMEX. "Given Chinese domestic copper stocks remain low and that the global market continues to run a small deficit, we are becoming more bullish about copper prices in 2012, especially with Chinese monetary and fiscal policy starting to ease," said analysts at Macquarie.
  Copper slips on China housing data, dollar
  
  
  

What to Watch for:

No notable releases