Written by Sumit Roy  |

January 17, 2012

Morning Call: Gold ($1662) Hits 5-Week High After China GDP Data; Saudis Want $100 Oil; NatGas In Free Fall

Details

With the exception of natural gas, commodities are up after better-than-expected China data.

IN TODAY'S HEADLINES ...

• While natural gas prices continue to plummet, commodities, on the whole, are up strongly after the long holiday weekend. The latest economic data from China is providing support.
  
  The National Bureau of Statistics reported that gross domestic product in China grew by 8.9 percent year-over-year in the fourth quarter, down from 9.1 percent in the third quarter. That's the slowest rate since the second quarter of 2009, but better than the 8.7 percent reading that was expected.
  
  Relatively weak data in China has done little to dissuade traders from buying, as many anticipate that the country's government will reinvigorate growth by loosening monetary policy.
  
  In Europe, Italian and Spanish 10-year bond yields fell by 17 basis points and 9 basis points, respectively, to 6.45 percent and 5.1 percent.
  
  The U.S. Dollar Index fell by 0.91 percent to 80.77.
  China Slowdown Is Certain, but Analysts Differ on How Much
  
  
• Gold hit the highest level in five weeks as the notable decline in the U.S. dollar spurred buying. The yellow metal was last trading higher by $19.13, or 1.16 percent, to $1662.93/oz, while silver gained $0.50, or 1.67 percent, to $30.49. Platinum hit the highest level since Dec. 7 and was last trading up by $30, or 2 percent, to $1528.25. Palladium gained $17.50, or 2.73 percent, to $659.
  
  "Interest came back in really at the start of the year," said Hayden Atkins, an analyst at Macquarie. "That rally, from where it was looking pretty dicey into year-end, has been a reinvigoration of interest. Now [it is taking] any excuse to trade up. The interest is already there."
  Gold hits 5-week high as euro, commodities rise
  
  
• Crude oil is rallying thanks to comments from Saudi Arabia's oil minister, who said that the Kingdom is hoping to stabilize prices near $100 this year. OPEC's largest producer has been dependent on increasingly higher prices as the government increases spending on social programs to appease the population.
  
  Brent was last trading higher by $1.35, or 1.21 percent, to $112.55/bbl, while WTI added $2.04, or 2.07 percent, to $100.74.
  Oil Rises to Three-Day High as Saudi Arabia Is Seen Targeting $100 Crude
  
  
• Natural gas prices continue to free-fall and were last trading lower by $0.11, or 4.08 percent, to $2.56/mmbtu. Earlier, prices reached as low as $2.53, the lowest level since September 2009.
  
  "This is a situation that has never been seen before," said Kyle Cooper, director of research for IAF Advisors. "If we hit 2.4 trillion [bcf in storage by the end of winter], you're looking at storage capacity constraints by July or August where you literally have system problems because the system is so full."
  Gas Bears Up Bets on 'Catastrophic' Surplus
  
  
• Grains are rebounding from last week's plunge as bargain hunters step into the market amid today's optimism in financial markets. "This must be a reaction to China's GDP being about what people thought it would be," said Gary Mead, an analyst at VM Group. "China's tight monetary policy might be eased and therefore Chinese demand will begin to rise."
  
  Corn was last trading higher by $0.08, or 1.38 percent, to $6.08/bushel, while soybeans added $0.18, or 1.42 percent, to $11.77, and wheat gained $0.10, or 1.58 percent, to $6.12.
  Soybeans, Corn Advance as China May Ease Policy After Slowdown in Growth
  
  
• The rally in copper continues today as prices surge another $0.10, or 2.76 percent, to $3.74/lb on Comex. Earlier prices reached $3.76—a four-month high.
  
  Traders are keying off the latest data from China; the country accounts for 40 percent of global copper demand. "Our economists expect the reserve requirement ratio already to be cut in the near future," said Commerzbank. "This is giving considerable buoyancy to metal prices this morning."
  Copper up after better-than-expected China GDP data
  
  
  

What to Watch for:

No notable releases