Written by Sumit Roy  |

August 08, 2012

Morning Call: Gold Drops To Near $1600, Chesapeake To Cut NatGas Output 7%

Details

Traders take profits after a three-day rally.

Commodities are lower on profit-taking after three sessions of gains. Once again, there are no major macroeconomic releases scheduled for the day.

In Europe, Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—rose by 8 basis points to 6.94 percent.

The U.S. Dollar Index rose by 0.29 percent to 82.45.

• Gold was last trading down by $8.20, or 0.51 percent, to $1604, while silver shed $0.36, or 1.28 percent, to $27.78.
  
  Platinum lost $9.38, or 0.67 percent, to $1399.37 and palladium shed $3.85, or 0.66 percent, to $582.90.
  
  "With resistance at $1,617-1,620 pretty formidable, and amidst quieter news, gold is likely to hover around $1,608-1,615 in today's trade," Richcomm Global Services Senior Analyst Pradeep Unni said.
  
  "Gold seems to be supported by hopes that Europe and the United States would launch more stimulus measures to help shore up their faltering economies," he added. "Investors are betting that the festering debt crisis in the euro zone could push the ECB to launch a new round of bond-buying soon."
  Gold eases with stocks, euro as risk appetite wanes
  
  
• Crude oil prices are lower ahead of the EIA's Weekly Petroleum Status report. Brent was last trading down by $0.70, or 0.63 percent, to $111.30, while WTI fell by $0.59, or 0.63 percent, to $93.08.
  
  The less-authoritative API report showed that crude inventories fell by 5.3 mmbbl, gasoline inventories rose by 0.4 mmbbl, and distillate inventories rose by 2.4 mmbbl last week.
  
  "We'll probably need to see further good news, further improvements in demand and the economic growth outlook for oil to move significantly higher," said Ric Spooner, a chief market analyst at CMC Markets. "We have seen a strong rally off the bottom of a few weeks ago."
  Oil Drops From Two-Month High in New York as U.S. Demand Eases
  
  
• Natural gas was last trading down by $0.01, or 0.2 percent, to $2.96/mmbtu. Chesapeake Energy, the second-largest producer in the U.S., said that its natural gas production will decline 7 percent next year.
  
  "We believe this trend of declining gas production could continue as long as gas prices do not permit gas producers to earn an attractive return on the investments necessary to finish developing the big new unconventional gas fields that have led to America's greatly increased gas production over the past five years," said CEO Aubrey McClendon.
  Chesapeake to cut natural gas production
  
  
• The grain complex is lower today. Corn was last trading down by $0.05, or 0.57 percent, to $7.92/bushel, while soybeans traded unchanged at $16.05 and wheat fell by $0.11, or 1.24 percent, to $8.78.
  
  "We have a holding pattern in the market today with participants waiting to see what the USDA will say on Friday and also waiting to hear the decision from the Russian meeting about grain exports," said Rabobank Analyst Erin FitzPatrick.
  
  "There are forecasts of more rain in the U.S. which is adding weakness to prices. But this rain is now likely to be too late to save much of the U.S. corn crop," she added.
  Prices dip before USDA report, Russian meeting
  
  
• Copper was last trading down by $0.03, or 0.89 percent, to $3.41/lb on Comex.
  
  "The sense from the recent ECB meeting is that maybe things will not get significantly worse and that the ECB may start to act as a lender of last resort," said Robin Bhar, analyst at Societe Generale.
  
  "That perhaps has put a floor under metals prices and, barring any further negative news, one could argue most of the bearish news flow should be in the price."
  Copper falls on weak euro; Europe crisis measures eyed
  
  

What to Watch For:

10:30 a.m. ET: Weekly Petroleum Status Report