Written by Sumit Roy  |

July 27, 2012

Week In Review: Gold Spikes To 3-Month High On Likely Central Bank Action, Oil Flat Ahead Of Fed Meeting

Details

We examine the latest developments in commodity markets and the week's performance.

It was a relatively volatile week for commodities, as concerns surrounding the eurozone re-entered the headlines. Early in the period, prices fell, only to rebound on Thursday and Friday. Overall, however, weekly gains and losses were quite modest as the early-week declines offset the late-week rally.

Stocks rose more than 1 percent on the week to the highest levels in three months. The S&P 500 is up 9.5 percent year-to-date.

Macroeconomic Highlights

The dominant theme in financial markets this week was the eurozone sovereign debt crisis. Spanish 10-year bond yields spiked to a record 7.75 percent on Wednesday amid intense concerns about the health of the government's finances. Italian yields also saw big moves to the upside.

However, comments by the head of the European Central Bank on Thursday calmed markets. ECB President Mario Draghi said that the central bank "is ready to do whatever it takes to preserve the euro."

Then on Friday, market sources in France said that the ECB and eurozone governments may be planning coordinated action to bring down Spanish and Italian interest rates. In response, yields on Spanish 10-year bonds fell to 6.74 percent.

While Europe hopes that the ECB offers relief to stresses in the region, investors in the U.S. are hoping that the Federal Reserve takes action of its own at its policy meeting on Wednesday.

In that regard, Friday's data on U.S. gross domestic product in the second quarter were supportive. GDP 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.

Commodity Wrap