Written by Sumit Roy  |

May 14, 2012

Market Wrap: Gold & Silver Continue To Plummet As Investors Grow Risk Averse, Saudi Calls For $11 Drop In Oil

Details

Commodities fell again today.

Steady selling pressure kept commodities under pressure on the first trading session of the new week.

News that China cut its bank reserve requirement ratio by 50 basis points to 20 percent failed to provide support, as some traders hoped for stronger action in the form of interest rate cuts. Last week, the government reported that industrial production grew at the slowest pace since 2009 in April.

In addition to China slowdown concerns, familiar worries related to the U.S. economy and eurozone sovereign debt also weighed on commodities today.

Fears are growing that Greece will be forced to exit the eurozone, as a split between pro-bailout and anti-bailout factions in parliament leaves the government paralyzed.

Yields on Spanish 10-year bond yields, which are currently seen as the best gauge of sovereign debt fears, rose by 22 basis points to 6.23 percent — the highest level since November 2011.

• Precious metals wiped out their entire gains for the year, as the sector dropped to the lowest levels since December. Gold was last trading down by $17.20, or 1.09 percent, to $1563.20/oz, while silver shed $0.47, or 1.63 percent, to $28.42. Platinum lost $20, or 1.37 percent, to $1441 and palladium shed $6, or 1 percent, to $594.
  
  "Gold is under severe pressure. The U.S. dollar is being seen as a safe haven at the moment and as long as the dollar is appreciating against the euro this is clearly weighing on the gold price," said Daniel Briesemann, analyst at Commerzbank.
  
  "I wouldn't be surprised if we test the December low of around $1,520 an ounce and if we don't stop here we could go below $1,500."
  
  
• Crude oil prices hit multimonth lows today after Saudi Arabian oil minister al-Naimi called for prices to fall further. "We want a lower price than where it is now," he said. "We need to get the price to a level of around $100 [for Brent]."
  
  Brent was last trading down by $1.24, or 1.1 percent, to $111.02 after briefly slipping to the lowest level since Jan. 25, while WTI shed $1.49, or 1.55 percent, to $94.64 after slipping to the lowest level since Dec. 19.
  
  
• Profit-taking hit natural gas today, as prices fell back from two-month highs. Gas was last trading lower by $0.07, or 2.87 percent, to $2.44/mmbtu.
  
  The grain complex was mixed today, as corn rebounded on bargain buying, while soybeans continued to sink on profit-taking. However, some analysts are expecting much lower prices for corn in the future amid a record harvest.
  
  "New crop corn will be about $4 probably after mid-July," said grains analyst Robert Bresnahan of Trilateral Inc. "A large portion of the crop was planted early and they received timely rains. I see a downtrend (in prices)."
  
  Corn was last trading to the upside by $0.03, or 0.49 percent, to $6.11/bushel, while soybeans fell by $0.10, or 0.71 percent, to $13.94 and wheat added $0.11, or 1.9 percent, to $6.04.
  
  
• Copper prices briefly fell to lowest levels since January today, as the broad-based selling in commodities weighed. Prices for the industrial metal were last trading at $3.55/lb, a loss of $0.10, or 2.74 percent.
  
  "It's hard to disentangle [China] from worries about Europe [that] have been mounting in recent days," said BNP Paribas analyst Stephen Briggs.
  
  "There are still some bullish factors. It looks like another year of deficit for copper, everyone seems to agree on that but everything is being overridden by bigger macro developments on the negative side."