Written by Sumit Roy  |

July 30, 2012

Market Wrap: NatGas Spikes To New 2012 High, Corn Back Near Record On Heat Wave; Gold Braces For Fed

Details

Natural gas and grains surged, while other commodities were little changed.

Most commodities treaded water today, but natural gas and grains surged on the back of weather forecasts. Traders are awaiting policy decisions from two of the world's most important central banks.

Last week, the head of the ECB promised to do whatever it takes to preserve the euro and stem the sovereign debt crisis. On Thursday, markets will see whether the central bank follows through with action in its policy meeting.

Ahead of that, the U.S. Federal Reserve will announce its latest monetary policy decision on Wednesday. Though an announcement of a third round of quantitative easing is not expected, most market participants see the central bank unveiling QE3 sometime this year. Thus, the Fed's statement will be closely scrutinized for clues on the timing of such a move.

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

The U.S. Dollar Index rose by 0.16 percent to 82.93.

• Gold was little changed today amid uncertainty surrounding what the Fed will do and say on Wednesday. The yellow metal was last trading up by $0.73, or 0.04 percent, to $1623.63, while silver added $0.47, or 1.68 percent, to $28.21.
  
  Platinum gained $7, or 0.5 percent, to $1418.25 and palladium edged up by $9.50, or 1.64 percent, to $588.25.
  
  "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.
  
  
• Crude oil prices were down modestly on profit-taking. Brent was last trading lower by $0.16, or 0.15 percent, to $106.31, while WTI lost $0.36, or 0.4 percent, to $89.77.
  
  "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.
  
  
• Forecasts for another wave of warmer-than-normal temperatures for the United States boosted natural gas to the highest levels of the year today. Prices were last trading up by $0.22, or 7.21 percent, to $3.23/mmbtu.
  
  "Temperatures are expected to be above normal for the next eight to 14 days, and we're looking at another low storage injection this week [on Thursday]," said Eric Bickel, analyst at Summit Energy.
  
  
• Grains rebounded, as prices spiked back near record highs. Corn was last trading up by $0.22, or 2.72 percent, to $8.20/bushel, while soybeans gained $0.41, or 2.43 percent, to $17.25 and wheat jumped $0.19, or 2.14 percent, to $9.17.
  
  "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."
  
  
• Copper was last trading down by $0.01, or 0.22 percent, to $3.42/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."