Written by Sumit Roy  |

July 30, 2012

Morning Call: Gold, Oil Fall As Traders Await Fed, ECB Action; NatGas Surges On Heat Forecasts

Details

Grains jump, while other commodities tread water.

With the exception of grains, commodities are narrowly mixed today, as prices pause following the ECB-inspired rally at the end of last week. Central banks will dominate headlines again this week; the FOMC will make its policy decision on Wednesday, while the European Central Bank is expected to unveil new measures to combat the sovereign debt crisis at its meeting on Thursday.

Spanish 10-year bond yields—currently seen as the best gauge of eurozone debt fears—continue lower ahead of potential ECB action. They were last trading down by 13 basis points to 6.61 percent.

The U.S. Dollar Index rose by 0.27 percent to 82.93.

• The rebound in the dollar is pushing gold prices lower. The yellow metal was last trading down by $6.20, or 0.38 percent, to $1616.70, while silver shed $0.09, or 0.32 percent, to $27.65.
  
  Platinum lost $9.50, or 0.67 percent, to $1401.75 and palladium edged down by $4, or 0.69 percent, to $574.75.
  
  "After the comments from Draghi, the ECB will have to deliver, otherwise it will end in catastrophe for the euro," Quantitative Commodity Research consultant Peter Fertig said. "If the ECB now delivers in cooperating with the EFSF (European Financial Stability Facility), there is a really good chance that we will see gold and silver break out to the upside." 
  
  "We have several resistance points, with the crucial area at $1,670 to $1,700. If you take that out, there could be a strong move towards $1,790, the high we reached at the end of February," he added.
  Gold eases below $1620 an ounce as euro retreats
  
  
• Crude oil prices are down on profit-taking. Brent was last trading lower by $0.76, or 0.71 percent, to $105.71, while WTI lost $0.66, or 0.73 percent, to $89.47.
  
  "The market is waiting to see if OPEC has responded to the higher oil prices of late and reduced production at all," said Carsten Fritsch, oil analyst at Commerzbank.
  Brent slips under $106, stimulus expectations fade
  
  
• Forecasts for another wave of warmer-than-normal temperatures for the United States are boosting natural gas today. Prices were last trading up by $0.11, or 3.49 percent, to $3.12/mmbtu.
  
  "Above normal temperatures still are a positive for natural gas prices even though the current forecast is not as severe as the temperatures actually were back in June," said the Energy Management Institute's Dominick Chirichella.
  U.S. natural gas drilling rig count hits 13-year low
  
  
• Grains are on the rebound, as prices spike back near record highs. Corn was last trading up by $0.22, or 2.72 percent, to $8.20/bushel, while soybeans gains $0.36, or 2.12 percent, to $17.20 and wheat jumps $0.18, or 2.03 percent, to $9.16.
  
  "The market fears that the severest drought to affect the U.S. for decades may worsen and could damage the crop far more seriously than previously predicted by the U.S. Department of Agriculture [USDA)]," Commerzbank wrote in a note to clients. "No correction is likely for as long as reports of drought keep coming in,"
  Corn sets contract high as drought bites more
  
  
• Copper was last trading down by $0.02, or 0.57 percent, to $3.41/lb on Comex.
  
  "People have got fed up with the thinking that rhetoric from the ECB is enough," Standard Chartered analyst Dan Smith said. "The ECB has to be more aggressive to turn things around. Draghi talking about it was enough to give the market a lift but that doesn't last very long. People want to see action rather than words."
  Copper falls on dollar, caution ahead of ECB meeting
  
  

What to Watch For:

4:00 p.m. ET: USDA Crop Progress Report