Written by Sumit Roy  |

July 19, 2012

Market Wrap: Brent Jumps To $108, NatGas Over $3, Corn & Soybeans Hit Records, Gold Underperforms

Details

Commodities rose, but gold underperformed.

Strong U.S. corporate earnings announcements and stimulus hopes helped boost stocks to the highest levels since May today. The improvement in investor sentiment spilled over into commodity markets, fueling a broad rally in the asset class.

But economic data in the world's largest economy remained weak.

The number of people filing for unemployment benefits in the U.S. jumped 34K to 386K last week. An increase was expected after the July 4 holiday and unusual activity at auto plants pushed the figure down artificially to a four-year low of 352K the week before.

Meanwhile, existing home sales in June fell by 5.4 percent to 4.37 million units, underperforming the expectation of a 1.5 percent increase.

The silver lining to disappointing macro data is that the likelihood of stimulus from the Federal Reserve increases.

The U.S. Dollar Index fell by 0.21 percent to 82.89.

• The broad rally in financial markets helped gold to advance today, but the yellow metal continued to lag without catalysts of its own. Prices were last trading up by $8.58, or 0.55 percent, to $1582.10/oz, while silver rose by $0.05, or 0.18 percent, to $27.24.
  
  Platinum rose by $11.75, or 0.84 percent, to $1417.75 and palladium advanced $8.75, or 1.52 percent, to $584.25.
  
  "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."
  
  
• The surge in crude oil prices continued, as Brent and WTI reached 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 $2.72, or 2.59 percent, to $107.88, while WTI rose by $2.87, or 3.19 percent, to $92.74.
  
  "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."
  
  
• Natural gas prices rose again today after surging in the prior session. The EIA reported that operators injected 28 billion cubic feet into storage last week, below the 31 to 34 bcf that was expected.
  
  Gas was last trading up by $0.05, or 1.61 percent, to $3.02/mmbtu.
  
  
• Corn and soybeans spiked to new record highs today, as the worst U.S. drought in 56 years continued 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."
  
  Corn was last trading up by $0.10, or 1.26 percent, to $8.05 after reaching as high as $8.17, while soybeans gained $0.50, or 3.01 percent, after reaching $17.49. Wheat rose by $0.27, or 3.02 percent, to $9.31.
  
  
• Copper benefitted from today's broad rally in commodities. The industrial metal was last trading higher by $0.06, or 1.76 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."