Written by Sumit Roy  |

July 05, 2012

Morning Call: Oil Up On China Rate Cut; Gold Sinks To $1600 As Dollar Spikes After ECB Cut, BOE QE

Details

• The dollar's rally is pressuring precious metals today, as gold sheds $12.33, or 0.76 percent, to $1603.30/oz, while silver loses $0.34, or 1.19 percent, to $27.80.
  
  Platinum was last trading down by $3.36, or 0.23 percent, to $1475.25 and palladium $6.70, or 1.13 percent, to $588.75.
  
  "Overall, rate cuts by China, the ECB, and the U.S. are all positive for gold, on a slightly longer view than just one day for the simple reason that with inflation where it is, you start cutting interest rates of course then real interest rates get lower. So we see it as a bullish development for gold, and most of the other precious metals should be benefit from that," Walter de Wet, analyst at Standard Bank, said.
  
  "Like many other commodities gold has been struggling under a lack of direction and this might give it a little more impetus. We think gold will go above $1,900 in the last quarter on exactly these reasons."
  Gold rises after China cut; focus on rates
  
  
• Crude oil prices are outperforming today, as Brent adds $1.48, or 1.48 percent, to $101.25, while WTI rises by $0.30, or 0.34 percent, to $87.96.
  
  A strike by Norway oil workers will shut the entirety of the country's offshore oil production totaling 2 mmbbl/d.
  
  "This strike and potential shutdown negatively impacts North Sea supply, as such the price of the Brent benchmark; that's why this is significant," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas. "The government has the legal right to end the strike and prevent the shutdown. The question is when they'll use it."
  Oil Rises to One-Month High as Strike Halts Norway Output
  
  
• Natural gas prices were last trading steady at $2.90/mmbtu, a loss of 0.14 percent. Weather forecasts show milder temperatures across the United States at the end of the next two-week period, but the respite may be short-lived.
  Natural Gas Liquids are Following Natural Gas Off a Fracking Cliff
  
  
• The grain complex is taking a pause after surging in recent sessions. Corn was last trading up by $0.03 to $7.22/bushel, while soybeans was steady at $15.72 and wheat traded unchanged at $7.82.
  Ukraine Lowers Corn Crop Forecast 8% as Fields Scorched
  
  
• Copper was last trading down by $0.02, or 0.58 percent, to $3.51/lb on Comex despite the rate cut by China.
  
  "Risk to prices in the near term is from positioning and [government] policy, either of which would trigger a sharp short-covering rally. However, we would view these gains as difficult to sustain without an improvement in economic activity," said analysts at Barclays.
  Copper steady after China
  
  

What to Watch For:

8:15 a.m. ET: ADP Employment Report (June)