Written by Sumit Roy  |

June 25, 2012

Market Wrap: Corn, Wheat, Natural Gas Surge On Heat Wave; Gold Rallies As Stocks Plunge

Details

Commodities outperformed, as stocks plunged.

Familiar concerns about the health of the global economy led to a sharp sell-off in stock markets today, but commodities outperformed as grains and natural gas surged on the back of forecasts for hot weather across the United States.

In economic news, new home sales in the U.S. jumped 7.6 percent in May to 369,000, beating the 347,000 estimate.

The U.S. dollar rose by 0.26 percent to 82.47, while the Spanish 10-year bond yield gained 26 basis points to 6.64 percent.

• Gold and silver rallied today, as the duo held above their respective key support levels of $1533 and $26. The yellow metal was last trading up by $12.40, or 0.79 percent, to $1584.85, while the gray metal gained $0.64, or 2.38 percent, to $27.55.
  
  Platinum edged up by $2.68, or 0.19 percent, to $1440.18 and palladium shed $2.64, or 0.43 percent, to $607.11.
  
  "The further deterioration of the economic recovery, enhanced potential for quantitative easing and continued structural problems in the euro zone lead us to believe that gold prices will stay stronger into 2014 and 2015," said analysts at Nomura.
  
  
• Crude oil was lower, pressured by demand concerns. Brent was last trading down by $0.35, or 0.38 percent, to $90.63, while WTI shed $0.80, or 1 percent, to $78.96.
  
  "The outlook for oil remains negative while [concerns about] the economic outlook in Europe weigh on demand," said Michael Hewson, an analyst at CMC Markets. "Investors remain skeptical that EU leaders will be able to agree on anything tangible to alleviate the current crisis."
  
  Limiting losses was Tropical Storm Debby in the Gulf of Mexico. Operators shut in 314 Kbbl/d, or 23 percent, of gulf output as a precaution against the storm, which is expected to make landfall in Florida later this week.
  
  
• Forecasts for a heat wave across the United States boosted natural gas, which may benefit from rising demand amid increased electricity generation. Prices were last trading up by $0.07, or 2.48 percent, to $2.69/mmbtu, just below last month's $2.75 high, which is formidable technical resistance.
  
  Tropical Storm Debby spurred operators to shut in 1 bcf/d, or 23 percent, of GoM output.
  
  
• The grain complex surged today on speculation that hot, dry weather in growing regions of the U.S. will damage the corn and soybeans crops. Corn was last trading up by $0.37, or 6.3 percent, to $6.28/bushel, while soybeans jumped $0.38, or 2.63 percent, to $14.81, and wheat rallied by $0.45, or 6.65 percent, to $7.18.
  
  "The corn is frying in the fields," said Chris Kraft, a futures trader and private investment manager. "We had the potential for the largest corn crop in U.S. history based on record plantings. We won't even be close now."
  
  "It is very much a weather-related rally in this session," added Luke Mathews, commodities strategist at the Commonwealth Bank of Australia. "Corn and soybeans are drawing support from dryness in the eastern corn-belt in the United States and wheat is drawing support from dryness in Ukraine and Russia."
  
  
• Copper was last trading up by $0.01, or 0.42 percent, to $3.32/lb.
  
  "There has been some consumer buying for copper, but it was only some spot buying and the size moderate. You won't have the large hedges coming in at this price as people don't have enough conviction and think the market might be trending lower," Ivan Szpakowski at Credit Suisse said.