Written by Drew Voros  |

February 16, 2012

Morning Call: Gold ($1711) Leads Commodities Down On Greek Delay, Brent Rises On Iranian 'Fear'

Details

Commodities are falling this morning as EU leaders delay a Greek bailout decision.

IN TODAY'S HEADLINES...

All major commodities except for Brent crude oil are down after European Union leaders have once again delayed a decision until Monday on whether to grant Greece a critical bailout. Greece would miss a debt payment next month without the funding, which is a growing concern.

However, in the U.S., positive economic news continued flow. New claims for unemployment benefits fell more than expected last week to a four-year low. Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 348,000, the Labor Department said, the lowest since March 2008. In addition, housing starts rose in January and December’s figures were revised upward.

“Europe is far off from reaching a solution,” said Dominic Schnider, global head of commodity research at UBS AG’s wealth management unit. “That’s the drag that we have, which will hurt demand for commodities.”

Commodities Drop From 6-Month High as EU Delays Decision on Greek Bailout

• Except for palladium, precious metals are taking the brunt of the falling euro. Gold was last trading down $16.15, or 0.94 percent to $1711.90/oz while silver fell $0.60, or 1.81 percent, to $32.84. Platinum dropped $27.50, or 1.65 percent, to $1611.10, but palladium was the standout, rising $1.38, or 0.20 percent, to $684.50. 
  
  "Gold stopped being a safe-haven store of value some time around August or September, when you had a huge spike in prices, followed by a collapse," said Natixis analyst Nic Brown. "Given that it is (now) trading like another commodity, the correlation with the dollar is one of the key determinants."
  Gold Retreats As Worries Over Greece Hurt Euro

• Brent and WTI crude oil went their separate ways this morning, further expanding their price spread. While Brent rose $0.65, or 0.55 percent, to $119.58/bbl—once again flirting with the key resistance of $120 on the back of Iran’s oil export cut announced Monday—WTI fell $0.27, or 0.27 percent, to $101.53. Brent would be used as a substitute for the six European countries affected by Iran's move. 
  
  “The primary reason we are higher is the Iran fear premium,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York.
  Oil Advances to One-Month High After Report Iran Cut Exports to Europe

• The grain complex is lower on improved weather conditions in South America, which is sending prices lower. Corn was down $0.03, or 0.40 percent, to $6.24/bushel, soybeans lost $07, or 0.54 percent, to $12.55 and wheat was flat at $6.25.

• Copper suffered from the fallout of the Greek delay as well, losing $0.06, or 1.57 percent, to $3.74/lb. The industrial metal fell to a three-week low.
  
  “Copper is suffering a double whammy from the delay of an effective resolution in Europe and weak Chinese demand,” said Li Ye, an analyst at Shanghai Jiuheng Futures Co. The metal gained 9.5 percent in January, ending a two-month decline.
  Copper Tumbles to Three-Week Low as Industrial Metals Decline