Written by Sumit Roy  |

May 21, 2012

Morning Call: Gold Falls Back After Testing $1600, Oil Rebounds As Goldman Says Surplus Is Disappearing

Details

Commodities trade in mixed fashion today.

The new trading week kicks off today with commodities on either side of the unchanged mark, as light news flow leaves traders to speculate about the prospects for economic growth and the sovereign debt crisis in Europe.

Spanish 10-year bond yields — currently seen as the best gauge of eurozone sovereign debt fears — were last trading higher by 3 basis points to 6.3 percent. The U.S. Dollar Index fell fractionally to 81.26, a loss of 0.04 percent.

• Gold prices are slightly lower today after reaching as high as $1599.34/oz earlier. The yellow metal was last trading down by $4.30, or 0.27 percent, to $1588.69, while silver shed $0.46, or 1.6 percent, to $28.28. Platinum added $5.75, or 0.4 percent, to $1461.25 and palladium rose by $9.75, or 1.61 percent, to $614.25.
  
  "[Gold's performance] really all depends on whether [its] new found rally can stand up to what I think will be weakness in the euro over the coming days," Marex Spectron said in a note.
  
  "Watch the correlation carefully, as if it seems that gold is functioning by itself, then on the basis that there is not likely to be much good news out of Europe, we could see higher numbers," it said. "However if gold falls back into its bad old ways and follows the euro, then this rally may be short lived."
  Gold steadies as softer euro curbs rebound
  
  
• Crude oil prices are up modestly from the lowest levels of 2012. Brent was last trading at $107.75, a gain of $0.61, or 0.57 percent, while WTI advanced $0.14, or 0.15 percent, to $91.62.
  
  "Despite concerns over the softening economic data, oil demand continues to improve," David Greely, head of energy research at Goldman Sachs, said. "The supply of oil actually available to the market is increasingly constrained by the inability of Iran to market its oil owing to the effects of US and European sanctions."
  
  "With Saudi ramping up production to meet the need for oil once sanctions against Iran come into full effect, the oil market was pushed into surplus this year," Greely said. "However, as Iranian supplies are increasingly shut out from the market as the sanctions take effect, that surplus is disappearing."
  Oil Rises First Time in Seven Days; Goldman Sees Tighter Supply
  
  
• Prices for natural gas were last trading down by $0.06, or 2.08 percent, to $2.69/mmbtu, as profit-taking and technical selling weigh on the fuel. Gas hit a three-month high last week above $2.75.
  Chesapeake CEO may have to fade into the sunset
  
  
• The grain complex is mixed today, with corn rising by $0.02, or 0.43 percent, to $6.38/bushel, while soybeans gains $0.09, or 0.64 percent, to $14.14 and wheat sheds $0.01, or 0.18 percent, to $6.94.
  
  "In the past days, numerous regions in Ukraine benefited from scattered showers," farm adviser Agritel wrote in a market report today. "These rains should continue in the coming days and even reach the regions of southwest Russia, where the [wheat] production potential so worries the operators."
  Wheat Slips as Rainfall May Ease Concerns Over Drought
  
  
• Copper prices are edging up for a second session on bargain buying. The industrial metal was last trading at $3.49/lb, a gain of $0.02, or 0.46 percent.
  Copper Climbs for Second Day as China Pledges to Boost Growth
  
  

What to Watch For:

No notable releases