Written by Sumit Roy  |

July 03, 2012

Market Wrap: Gold Jumps $25 Ahead Of Holiday, Oil Surges Another 5%, Grains Continue To Spike Higher

Details

Commodities rally ahead of the July 4 holiday in the U.S. (financial markets will be closed).

Commodities and stocks surged in today's shortened trading session, as the rally that began last week resumed. A combination of ebbing eurozone sovereign debt concerns following Friday's surprise action by EU leaders and growing stimulus hopes amid weak manufacturing data from around the world supported prices.

The S&P 500 stock index rose to the highest level in two months.

Meanwhile, in today's economic data, factory orders in the U.S. rose by 0.7 percent in May, topping the 0.1 percent increase that was anticipated.

In Europe, the Spanish 10-year bond yield—currently seen as the best gauge of eurozone sovereign debt fears—fell by 13 basis points to 6.25 percent.

The U.S. Dollar Index shed 0.07 percent to 81.81.

• Gold and silver were higher today, as traders speculated that the Fed may ease monetary policy further following Monday's weak reading on U.S. manufacturing. The yellow metal was last trading up by $24.80, or 1.55 percent, to $1621.90/oz, while silver jumped $0.81, or 2.96 percent, to $28.31.
  
  Platinum added $32.27, or 2.22 percent, to $1488.02 and palladium rose by $20.83, or 3.6 percent, to $599.08.
  
  "Gold lacks direction, but sees a stronger quarter ahead as the spotlight returns to the U.S. economy," said Lynette Tan, an investment analyst at Phillip Futures. "Gold prices have been sensitive to signs of economic weakness, which tend to increase the likelihood of monetary easing by the Federal Reserve."
  
  
• Crude oil surged amid renewed supply jitters. The European Union's embargo on Iranian crude went into full effect on Sunday. In response, Iranian lawmakers began drafting a law to close the Strait of Hormuz to any tankers destined for EU countries.
  
  "Growing political tension and potential supply disruptions will be supportive for oil prices, particularly Brent, despite macroeconomic concerns," Mark Pervan, the head of commodity research at Australia & New Zealand Banking Group, said.
  
  Brent was last trading up by $3.25, or 3.34 percent, to $100.59 after surpassing $101 earlier, while WTI gained $3.74, or 4.47 percent, to $87.49.
  
  
• Natural gas prices were last trading at $2.87/mmbtu, a gain of $0.05, or 1.7 percent. Weather forecasts for the next two-week period continue to show warmer-than-normal temperatures across the United States, which should boost demand for gas.
  
  
• The relentless rally in grains continued today, as corn added another $0.32, or 4.55 percent, to $7.24/bushel, while soybeans rose by $0.40, or 2.61 percent, to $15.72 and wheat advanced $0.28, or 3.68 percent, to $7.82.
  
  Corn is at a nine-month high, soybeans is at a four-year high and wheat is at a 13-month high.
  
  On Monday, the USDA's Crop Progress Report showed that only 48 percent of the corn crop was in good-to-excellent condition, down from 56 percent the week before. Only 45 percent of the soybeans crop was in good-to-excellent condition, down from 53 percent.
  
  "We are in the grip of a strong weather market and conditions in the U.S. appear to have little respite, with drought continuing across much of the Midwest and temperatures rising above 100 degrees with more regularity," said analysts at FCStone Commodity Services.
  
  
• Copper was last trading up by $0.07, or 2.01 percent, to $3.53/lb—the best level since May. Prices received a boost from the broad-based buying in commodities.
  
  "We've had some quite negative data out of the United States, and on the back of this we're seeing weakness in the dollar and expectations that the Fed will act sooner rather than later," Deutsche Bank analyst Dan Brebner said.
  
  "Also in China there's a growing sense that we may see further stimulus, with another reserve ratio cut, so I think those two things are supporting the base metals," he added.