Written by Drew Voros  |

May 16, 2012

Morning Call: Gold & Oil Fall On Greek Crisis, But Goldman Stands By $1920 Gold Call And Soros Buys More GLD

Details

Stocks and commodities continue to fall.

The concern over a growing Greek financial crisis and the uncertainty of a newly called June election there continues to weigh on global financial markets this morning. The euro fell to a four-month low, dragging gold down with it.

While U.S. stock futures point to a small rebound after another losing session Monday, that may be wishful thinking. New polls out of Greek show leftists who are opposed to the austere measure of the bailout winning the election. Coupled with a bank run by Greeks fearful of devaluation that saw 700 million euros withdrawn Monday, there’s little doubt the country is in turmoil.

However, despite the Greek situation, Spanish debt, a measure of volatility in the eurozone, fell this morning by 10 basis points to 6.248 percent.

With the April U.S. industrial production report being the only economic report of note today, the situation is Greek in surely to weigh heavily on U.S. markets again today.

• The precious metals complex is generally down. However, gold did receive some public support from Goldman Sachs and billionaire investor George Soros. Goldman Sachs wrote in a May 9 report that the Federal Reserve is likely to start a third round of stimulus in June and gold will hit $1920/oz. in 12 months. The metal rose about 70 percent as the Fed bought $2.3 trillion of debt in two rounds of so-called quantitative easing ending in June 2011. In addition, Soros raised his stake in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, according to a filing Tuesday reflecting first-quarter holdings.
  
  Gold last traded down $3.71, or 0.24 percent, to $1540.50/oz, while silver lost $0.25, or 0.95 percent, to $27.48. Platinum fell by $13.80, or 0.95 percent, to $1432.70 and palladium outperforms by adding $0.50, or 0.08 percent, to $596.25.
  
  “Usually, gold could be viewed as a safe haven or a contra play to the U.S. dollar,” said Bill Greiner, who helps manage $13 billion of assets as chief investment officer at Mariner Wealth Advisors in Kansas City, Mo. “It’s really doing neither right now. It’s highly possible that we’ll see gold and commodities in general continue to drift down until the Fed steps in with some sort of quantitative easing package.”
  Gold Eclipsed by Dollar Haven as Goldman Sees Rally

• Oil prices are continuing their descent, hitting six-month lows on the back of rising inventories and the fears of more economic slowdown across the globe. The American Petroleum Institute said inventories rose 6.6 mm/bbl last week. Brent continues to hold above the key resistance of $110. Prices for the benchmark were last trading lower by $0.57, or 0.51 percent, to $111.67, while WTI lost $1.18, or 1.26 percent, to $92.80.
  
  “We have demand destruction at the same time that supply risks are being relieved,” said Hakan Kocayusufpasaoglu, chief investment officer at Archbridge Capital in Zug, Switzerland, who predicts that commodities will recover in the second half of the year.
  Oil Drops to Six-Month Low on Rising Stockpiles, Greek Crisis

• Natural gas continues to play the contrarian role in the commodities sector by rising again on Wednesday. With prices rising $0.04, or 1.55 percent, to $2.54 mm/btu Wednesday morning, the energy product rallied more than 33 percent from its low a few weeks ago of $1.90 mm/btu. 
  
  
• The grain complex is down as well, with soybeans falling under $14 a bushel for the first time in weeks. Soybeans fell $0.16, or 1.13 percent, to $13.97/bushel. Corn shed 0.03, or 0.46 percent, to $5.95, while wheat was unchanged at $6.08.
  
  
• Copper prices are lower for a fourth-straight session, as global growth — and in particular China — pressure prices. The industrial metal was last trading down by $0.04, or 1.14 percent, to $3.48/lb — the lowest level since January.