Written by Sumit Roy  |

June 21, 2012

Market Wrap: Gold Plunges $40, WTI Sinks To $78 Amid Risk Aversion; NatGas Outperforms

Details

Commodities fell across the board today.

Commodities plunged today, as prices continued to selloff following Wednesday's Fed decision to extend its Operation Twist program, which disappointed some who were hoping for stronger action from the central bank. Traders refocused their attention on economic slowdown concerns in the U.S., Europe, and China.

In economic news, the number of people filing unemployment claims fell slightly from an upwardly-revised 389K to 387K last week. Meanwhile, existing home sales fell by 1.5 percent in May to 4.55 million units.

Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—continued to retreat for a second day, dropping 13 basis points to 6.61 percent.

The U.S. Dollar Index was last trading at 82.36, a gain of 0.95 percent.

• Gold led precious metals lower, as the yellow metal struggled after the Fed dashed hopes for QE3 on Wednesday. Prices were last trading down by $39.75, or 2.47 percent, to $1567.73/oz, while silver shed $1.21, or 4.31 percent, to $26.95.
  
  Platinum lost $17, or 1.17 percent, to $1441.75 and palladium shed $11, or 1.78 percent, to $608.25.
  
  "I think people's estimation of the probability of QE III was pretty low, but now we're seeing a bit of an unwind in gold," Credit Suisse analyst Tom Kendall said. "Looking forward now to see what happens with U.S. data - the jobs data in particular. The market will also be intensely focused on the next FOMC in August."
  
  "They can't really do anything additional really on Operation Twist as that is set in motion for the next six months," he said. "So if there's something in August, it will either be some new unconventional measure, which is possible, or what the market would really interpret bullishly is a further extension of the Fed's balance sheet."
  
  
• The free-fall in crude oil prices continued today, as Brent dropped to a fresh 19-month low, while WTI hit an 8-1/2 month low. Brent was last trading down by $3, or 3.24 percent, to $89.69 after hitting $88.90 earlier. WTI fell by $3.11, or 3.8 percent, to $78.69 after falling as low as $78.05.
  
  "There's negative momentum in the market, which is being accelerated by the inventory data, bad economic sentiment and a stronger dollar," said Eugen Weinberg, head of commodities research at Commerzbank AG. "I see markets bottoming in late summer, until then further slippage is likely."
  
  
• Natural gas was last trading up by $0.07, or 2.78 percent, to $2.59/mmbtu after the EIA' Weekly Storage Report, which showed that operators injected 62 billion cubic feet into inventories last week, below the 64 to 67 bcf that analysts were expecting.
  
  
• The grain complex was lower today, as corn fell by $0.22, or 3.64 percent, to $5.90/bushel, while soybeans shed $0.08, or 0.52 percent, to $14.39 and wheat lost $0.04, or 0.6 percent, to $6.60.
  
  We are seeing a risk-off day," said Luke Mathews, commodities strategist for the Commonwealth Bank of Australia. "The crude oil market is extending its very sharp losses from yesterday on the back of negative sentiment flowing around the market, and that influence is flowing through into grains."
  
  "There were some hope that the Fed would take further aggressive measures [to stimulate the economy] and the market has been disappointed," said Ross Strachan, economist at Capital Economics.
  
  
• Copper fell by $0.09, or 2.64 percent, to $3.30/lb on Comex.
  
  "There were some hope that the Fed would take further aggressive measures [to stimulate the economy] and the market has been disappointed," said Ross Strachan, economist at Capital Economics.