Written by Sumit Roy  |

August 07, 2012

Market Wrap: Brent Surges To $112 As Risk Appetite Increases, NatGas Nears $3 Again, Gold Trades Flat

Details

Most commodities rose today, but gold traded flat and grains underperformed.

The rally in commodities continued today amid economic optimism. Last Friday's better-than-expected U.S. nonfarm payrolls report raised hopes that the world's largest economy may be reaccelerating after a slow patch early this year.

Stocks performed especially well. The S&P 500 hit the highest levels in three months, surpassing the 1400 level.

In Europe, Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—were last trading up by 12 basis points to 6.86 percent.

The U.S. Dollar Index fell by 0.07 percent to 82.21.

• Gold was last trading unchanged at $1610.50, while silver edged up by $0.22, or 0.8 percent, to $28.12.
  
  Platinum gained $10.25, or 0.73 percent, to $1409.75 and palladium rose by $6.75, or 1.16 percent, to $586.75.
  
  "It's all about the exchange rates," said David Wilson, analyst at Citigroup. "We've had a slightly softer dollar, and that's been supportive."
  
  "Every so often we get some more optimism that Europe is sorting out its problems, as we did over the second half of last week, but I don't think this [strength] will continue," he added. "For that, we really need to see a significantly softer dollar, and that won't happen until the Fed takes action," he added.
  
  
• Crude oil prices were higher amid the broad-based buying in commodities. Brent hit a fresh three-month high at $112.56 earlier. The benchmark was last trading up by $2.46, or 2.25 percent, to $112.01, while WTI advanced $1.54, or 1.67 percent, to $93.74.
  
  "Oil markets are being driven up by a combination of market speculators being positioned short, the recent ECB announcements from Draghi and Middle Eastern supply concerns," said Guy Wolf, macro strategist at Marex Spectron.
  
  "We've seen a decent level of inventory draw in the U.S. recently so an active hurricane season could take the market extremely tight."
  
  
• A second session of bargain buying lifted natural gas. The fuel was last trading up by $0.08, or 2.89 percent, to $2.99/mmbtu.
  
  "We came down pretty hard after the recent high. Weather forecasts have turned bearish and there are no immediate storm threats, but [it's bouncing off] technical support," said Steve Mosley at SMC Advisory Services.
  
  
• Grains underperformed today. Corn was last trading lower by $0.07, or 0.81 percent, to $7.97/bushel, while soybeans rose by $0.03, or 0.19 percent, to $16.10 and wheat fell $0.03, or 0.36 percent, to $8.90.
  
  "We are approaching the U.S. Department of Agriculture's monthly supply and demand report, and the market is going to be a bit jumpy in the lead up to that," said Luke Mathews, commodities strategist at the Commonwealth Bank of Australia.
  
  
• Copper was last trading up by $0.05, or 1.52 percent, to $3.44/lb.
  
  "We are sitting here and waiting for the eurozone to deliver something," said Andrey Kryuchenkov, analyst at VTB Capital.
  
  "Markets are up on speculation that the ECB will make a move soon but copper has been range-bound since the June sell-off and it is unlikely to move much until you see the Chinese depleting their domestic warehouses. Chinese demand is still anemic at the moment," he added.