Written by Sumit Roy  |

February 02, 2012

Morning Call: Gold Outperforms, Edges Toward $1750 Ahead of Jobs Report; WTI Drops To 6-Week Low

Details

Profit-taking hits commodities, but gold holds firm.

IN TODAY'S HEADLINES...

The bias in commodities markets today is lower, as traders take profits and re-evaluate their positions ahead of Friday's U.S. nonfarm payrolls report. News flow is light, while the U.S. Dollar Index was last trading higher by 0.25 percent to 79.12.

• Precious metals are narrowly mixed as recent gains are digested. Gold was last edging up by $1.55, or 0.09 percent, to $1744.95/oz, while silver inched lower by $0.03, or 0.1 percent, to $33.66. Platinum added $2.75, or 0.17 percent, to $1621 and palladium eked out a $0.25, or 0.04 percent, gain to $696.75.
  
  "The underlying bid tone in the gold market suggests that another leg higher is only a matter of time," said Edel Tully, an analyst at UBS. "[It's] ability to hold up better than other assets would be another signal that it is recovering its safe-haven characteristics."
  Gold May Drop As Stronger Dollar Prompts Investors to Sell; Silver Falls
  

• Once again, the two major crude oil benchmarks are diverging, with Brent higher and WTI lower. The former was last trading up by $0.18, or 0.16 percent, to $111.74/bbl, while WTI shed $0.71, or 0.73 percent, to $96.90, near the lowest levels since Dec. 20.
  
  The spread between Brent and WTI is now close to $15, the highest level since mid-November of last year. The EU embargo on Iranian oil exports (pushing up Brent) and climbing oil inventories in the U.S. Midwest (pushing down WTI) may be to blame.
  US Oil Demand Plunges to Lowest Since 1999, S. Sudan Shuts Off Oil Production
  
  
• Natural gas is steady as prices hover just above last week's 10-year low of $2.23/mmbtu. Prices were last trading fractionally lower at $2.38, a loss of 0.17 percent. Trading action over the next week will determine whether prices have indeed put in a short-term bottom or whether the free fall is set to resume.
  Cheap natural gas jumbles energy markets, stirs fears it could inhibit renewables
  

• Grain traders are taking profits today. Corn was last trading lower by $0.06, or 0.93 percent, to $6.36/bushel, while soybeans shed $0.08, or 0.62 percent, to $12.08, and wheat lost $0.11, or 1.59 percent, to $6.64.
  
  "The winter remains unusually mild in the U.S., which could have a positive effect on [winter wheat] crop growth there, particularly since there has recently been sufficient rainfall in areas of cultivation," said Carsten Fritsch, an analyst at Commerzbank AG.
  Wheat Drops as Rain Predicted in U.S. Boosts Crop Prospects; Corn Declines
  

• Copper is lower by $0.05, or 1.17 percent, to $3.80/lb on Comex, the fourth decline in five sessions. "The recent price move was in anticipation of Chinese buying beyond the Lunar New Year. I think in the short term, the danger is that people are going to be disappointed," said Nic Brown, head of commodity research at Natixis.
  Copper falls on Europe debt caution, demand doubts
  
  
  

What to Watch For:

8:30 a.m. EST: Initial Jobless Claims

10:30 a.m. EST: Weekly Natural Gas Storage Report