Written by Sumit Roy  |

July 27, 2012

Morning Call: Gold Hits Highest Since June At $1630 On ECB Rumors, Oil Rises As US GDP Grows 1.5%

Details

Most commodities are higher again today.

The rally in commodities and stocks continues today amid rumors of policy action by the European central bank and after the first reading on 2Q GDP in the United States came out in line with expectations. The U.S. Dollar Index fell by 0.2 percent to 82.64, while Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—fell by 21 basis points to 6.72 percent.

Sources told a newspaper in France that the ECB and eurozone governments are planning coordinated action to bring down Spanish and Italian interest rates. Meanwhile, Germany joined the central bank in pledging to do whatever was necessary to preserve the euro.

In economic news, gross domestic product in the U.S. grew at a 1.5 percent annualized rate in the second quarter. The figure was close to expectations and low enough to keep QE3 hopes alive, but not so low as to raise recession fears.

• Gold traded at the highest levels since June, as speculation grows that the ECB, the Fed or both will take additional policy action. The yellow metal was last trading up by $4.51, or 0.28 percent, to $1620.28/oz after reaching as high as $1629.35, while silver gained $0.02, or 0.08 percent, to $27.57.
  
  Platinum rose by $5, or 0.36 percent, to $1410.75 and palladium edged up by $5, or 0.88 percent, to $575.25.
  
  "We have heard all this [talk] before from [ECB President] Draghi and other Euro luminaries and so far, they have not backed up their words with action," said David Govett of Marex Spectron. "However, I suspect we are now at a juncture where unless they act, the Euro may be doomed, so it would not surprise me at next week's ECB meeting to get some concrete evidence of action. This is what the market will wait to see."
  Gold rises on ECB action hopes, subdued dollar
  
  
• Crude oil is higher, but subdued as the energy component digests conflicting supply and demand signals. Brent was last trading up by $0.60, or 0.57 percent, to $105.86, while WTI rose by $0.30, or 0.34 percent, to $89.69.
  
  "Financial markets see a benign mix of gently rising risk appetite as worries over an imminent euro zone disaster ease and prospects for another U.S. stimulus increase," said Carsten Fritsch, oil analyst at Commerzbank.
  Oil rises towards $106 on euro zone, QE hopes
  
  
• Natural gas was last trading down by $0.02, or 0.55 percent, to $3.09/mmbtu. As we wrote in a report on Thursday, prices may stay range-bound just above and below $3 before making their way higher after August.
  Natural Gas Looks Poised To Pause In Aug. Before Resuming Climb To $3.50 And Higher
  
  
• The grain complex is higher, as corn and soybeans continue to seesaw back and forth after hitting record highs last week. Corn was last trading up by $0.07, or 0.9 percent, to $7.88/bushel, while soybeans rose $0.18, or 1.1 percent, to $16.74 and wheat jumped $0.13, or 1.5 percent, to $8.97.
  
  "Grains are [pausing] mainly due to rain forecast which will benefit soybeans [supply]," said Lynette Tan, investment analyst at Phillip Futures in Singapore. "The damage to corn has been done, so the downside in corn will be less."
  Soybeans, corn face first weekly drop since mid-June
  
  
• Copper was last trading higher by $0.02, or 0.56 percent, to $3.39/lb on Comex.
  
  "There was a big relief rally after Draghi's comments calmed the market down by saying the ECB will do whatever it takes for the euro zone, and the market is reassured by that," said Nic Brown, head of commodity research at Natixis.
  Copper up more on Draghi, U.S. growth eyed
  
  
  

What to Watch For:

8:30 a.m. ET: U.S. Gross Domestic Product (2Q)

1:00 p.m. ET: Baker Hughes Rig Count