Written by Sumit Roy  |

July 19, 2012

Morning Call: Oil Surges To Highest Since May, Grains Spike To Record, Gold Near $1590 As Sentiment Improves

Details

• The broad rally in financial markets is helping gold to advance today, but the yellow metal continues to lag without catalysts of its own. Prices were last trading up by $15.03, or 0.96 percent, to $1588.55/oz, while silver rose by $0.34, or 1.26 percent, to $27.53.
  
  Platinum rose by $19.75, or 1.4 percent, to $1425.75 and palladium advanced $8.25, or 1.43 percent, to $583.75.
  
  "It seems that every time we do not have QE3 announced, gold slips back as some of these more speculative positions are liquidated," Mitsui Precious Metals analyst David Jollie said. "After that disappointed selling, I think the market returns to more normal behavior and some of these speculators will try to rebuild positions. Others such as the official sector are also likely buyers on price declines."
  Gold prices rise 1 percent as euro, stocks climb
  
  
• The surge in crude oil prices continues, as Brent and WTI reach the highest levels since May. As we wrote in Wednesday's Crude Oil Report, extremely low levels of spare capacity within OPEC will keep prices on an upward trend.
  
  Brent was last trading up by $1.98, or 1.88 percent, to $107.14, while WTI rose by $1.33, or 1.48 percent, to $91.20.
  
  "The weekly data showed reasonable demand for gasoline that's not as weak as had been initially thought," said Peter Luxton, an analyst at Informa Global Markets. "I'd hesitate to use the word tightness, but there's not as much slack in the market as there'd otherwise have been."
  Oil Rises for a Seventh Day on U.S. Gasoline Stockpiles
  
  
• Natural gas prices are steady at $2.97/mmbtu today after surging in the prior session. Gas is still having trouble decisively breaking through the psychologically significant $3 mark, but we anticipate that it will eventually do so.
  
  Today's Weekly Storage report from the EIA may show that operators injected around 34 billion cubic feet into inventories last week, according to most analyst estimates.
  Natural Gas Surges to Near $3
  
  
• Corn and soybeans are spiking to new record highs today, as the worst U.S. drought in 25 years continues to fuel supply fears. Wheat is at the highest levels since 2008.
  
  "There is not going to be enough supply to go around," said Richard Feltes, vice president of research at R.J. O'Brien & Associates. "The U.S. drought is laying the groundwork for higher food inflation into 2013."
  Soybeans Surge to Record as Midwest Drought Scorches Crop
  
  
• Copper is benefiting from today's broad rally in commodities. The industrial metal was last trading higher by $0.06, or 1.73 percent, to $3.53/lb on Comex.
  
  "The copper market's still basically in deficit and I think it'll be tighter in three or four months' time than it is now," said Stephen Briggs, an analyst at BNP Paribas. "It's a bit early to be positioning for September onwards when demand begins to pick up, but you actually often see big moves in August in some years, so people may be positioning ahead of the positioning."
  Copper gains 1 percent, lifted by housing data, dollar
  
  

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