Written by Sumit Roy  |

July 31, 2012

Morning Call: Gold Rises To $1625 Ahead Of Fed, NatGas Falls After Hitting 7-Month High, Corn Crop Deteriorates

Details

Commodities hold their ground ahead of two key central bank policy decisions.

Commodities and stocks are little changed, one day ahead of the Fed's policy decision on Wednesday. A CNBC survey of Wall Street professionals showed that 78 percent expect that the Federal Reserve will initiate another round of quantitative easing (QE3).

However, most market participants don't see the central bank acting until its September meeting. Only 26 percent believe that it will unveil QE3 on Wednesday.

Meanwhile, 89 percent of survey respondents see the European Central Bank stepping into the market to buy sovereign debt to stem the crisis in the region. The ECB makes its next policy decision on Thursday.

In today's economic news, personal income in the United States rose by 0.5 percent in June, slightly better than the 0.4 percent that was expected. Personal spending was flat, below the 0.1 percent increase that was anticipated.

The U.S. Dollar Index was little changed at 82.76.

• Gold prices are near multimonth highs, as traders position themselves ahead of Wednesday's Fed meeting. The yellow metal was last trading up by $2.68, or 0.17 percent, to $1624.65/oz, while silver edged up by $0.08, or 0.27 percent, to $28.26.
  
  Platinum rose by $11.50, or 0.81 percent, to $1428.25 and palladium edged up by $2, or 0.34 percent, to $590.75.
  
  "Some of the tools the Fed could use [to stimulate growth] include extending the use of quantitative easing, extending 'Operation Twist', or employing new tools such as cutting interest on reserves, or extending interest rate guidance," analysts at HSBC said in a note.
  Gold firms as euro edges up ahead of ECB meeting
  
  
• Crude oil is modestly higher today, as prices continue to hover in a narrow band awaiting a catalyst. Brent was last trading up by $0.15, or 0.14 percent, to $106.35, while WTI rose by $0.36, or 0.41 percent, to $90.15.
  
  "Crude futures are taking their cue from the broader market," said Andrey Kryuchenkov, an analyst at VTB Capital. "Euro zone policy makers are still boosting sentiment by reiterating their commitment to the single currency union."
  Crude Oil Rises, Set for First Monthly Advance in Three
  
  
• Natural gas is lower after hitting another high for the year earlier in the session. Prices were last trading at $3.18/mmbtu, down $0.03, or 1.03 percent, after reaching as high as $3.25.
  
  "As long as we see strong cooling demand, prices are going to go higher," said Gene McGillian, an analyst at Tradition Energy.
  Don't Touch GAZ To Invest In Red-Hot Natural Gas
  
  
• Corn and soybeans are steady near record highs.
  
  In its Crop Progress report on Monday, the USDA said that 24 percent of the U.S. corn crop was in good-to-excellent condition, down from 26 percent. Meanwhile, 29 percent on the soybeans crop was in good-to-excellent condition, down from 31 percent.
  
  Corn was last trading up by $0.01, or 0.12 percent, to $8.21/bushel, while soybeans added $0.11, or 0.64 percent, to $17.36 and wheat fell by $0.02, or 0.16 percent, to $9.13.
  Corn on track for biggest monthly gain in over 5 years
  
  
• Copper was last trading up by $0.03, or 0.83 percent, to $3.44/lb.
  
  "Markets are stuck in a 'wait and see' mode ahead of the ECB meeting on Thursday. [ECB President Mario] Draghi has raised expectations significantly and will be expected to deliver on his words, else suffer a material blow to his credibility," said Guy Wolf, macro strategist at broker Marex Spectron.
  Copper climbs on hopes for China growth, ECB action
  
  

What to Watch For:

8:30 a.m. ET: Personal Income/Spending (June)

4:30 p.m. ET: API Weekly Statistical Bulletin