Written by Sumit Roy  |

July 10, 2012

Market Wrap: Gold Tumbles As Dollar Nears 2-Year High, Oil Falls As China Slashes Imports, NatGas Plunges

Details

Commodities fell across the board.

Commodities fell across the board today, as growth worries re-emerged following weak trade data from China and a series of disappointing corporate earnings announcements in the U.S.

China had a trade balance surplus of $31.73 billion in June, as imports rose by 6.3 percent year-over-year, while exports rose by 11.3 percent. The import figure was seen as disappointing, but not out of line with recent readings.

In Europe, the Spanish 10-year bond yield—currently seen as the best gauge of eurozone sovereign debt fears—fell by 25 basis points to 6.81 percent.

The U.S. Dollar Index was last trading up by 0.27 percent to 83.38, close to two-year highs.

• The precious metals sector fell today, as strength in the U.S. currency weighed on prices again. Gold was last trading down by $17.63, or 1.11 percent, to $1570.05/oz, while silver lost $0.55, or 2.01 percent, to $26.79.
  
  Platinum fell by $19.50, or 1.35 percent, to $1424 and palladium shed $8.50, or 1.46 percent, to $575.50
  
  Despite today's decline, most analysts remain bullish on gold.
  
  "Loose monetary policies, with a scope for more aggressive balance sheet use in the U.S. and Europe, will keep real rates in most reserve currencies low [or negative] during 2012. We continue to believe that this will allow investor demand to remain strong and prices to reach our $2,000/oz target by the end of the year," said analysts at Merrill Lynch.
  
  
• Crude oil prices moved lower today after the Norwegian government intervened to end a strike that threatened to shut down much of the country's oil output.
  
  Meanwhile, the latest trade data showed that China's imports of crude fell sharply to 5.28 mmbbl/d in June from a record 5.98 mmbbl/d in the prior month.
  
  Brent was last trading down by $2.17, or 2.16 percent, to $98.15, while WTI shed $1.89, or 2.2 percent, to $84.10.
  
  
• Natural gas tumbled today despite the ongoing heat wave in the United States. The NOAA said that the first half of 2012 was the warmest on record in the United States. While that was a significantly bearish factor early in the year, as it led to an extremely mild winter, it is now a bullish factor, as temperatures sizzle and the demand for electricity jumps.
  
  Nevertheless, gas fell by $0.14, or 4.89 percent, to $2.74/mmbtu, as technical traders sold after prices failed to breach $3 after hovering near that level for multiple sessions.
  
  
• The grain complex took a breather, one day ahead of the USDA's highly anticipated Crop Production report, which will include the department's latest forecast for supply and demand, including crucial yield estimates.
  
  "Radical cuts in the yield and crop forecasts by the USDA tomorrow are inevitable," Commerzbank analysts said.
  
  In its Crop Progress report, the USDA said that only 40 percent of the corn crop was in good-to-excellent condition, down from 48 percent the week before. Likewise, only 40 percent of the soybeans crop was in good-to-excellent condition, down from 45 percent.
  
  Corn was last trading down by $0.13, or 1.64 percent, to $7.63/bushel, while soybeans lost $0.11, or 0.66 percent, to $16.54 and wheat fell by $0.04, or 0.43 percent, to $8.07.
  
  
• Copper was last trading at $3.39/lb on Comex, a loss of $0.04, or 1.11 percent.
  
  China's imports of copper fell almost 18 percent month-over-month in June to 346K metric tons. However, for 2012 as a whole, imports have been 47 percent higher than last year, according to Reuters.