Written by Sumit Roy  |

August 23, 2012

Morning Call: Silver Surges Past $30 On QE3 Hopes, Gold Tops $1660, NatGas Awaits Inventory Report

Details

Precious metals and oil rise on Fed stimulus hopes, while natural gas holds steady.

Federal Reserve officials were extremely close to unveiling new stimulus measures at their last policy meeting on August 1. That was the message markets heard after the release of the minutes of the Fed meeting on Wednesday.

Members of the FOMC said that more monetary easing would likely be forthcoming unless the economy improved. That spurred risk assets higher, and precious metals in particular benefited amid hopes for a third round of quantitative easing (QE3).

That rally continues today, though in remarks to CNBC today, St. Louis Fed President James Bullard added that the recent improvement in economic data means that the central bank probably won't take any new action.

"If we were to resume, and I think we will, 2 percent growth, maybe a bit stronger than that in the second half of the year, unemployment ticks down through the rest of the year, that's not a great outcome but that's a good enough outcome to keep us on hold," he said.

Nevertheless, the idea that the Fed stands ready to deliver new stimulus should economic growth stumble is reassuring to many investors.

The U.S. Dollar Index fell by 0.13 percent to 81.38.

• Precious metals continue to surge, as gold, silver and platinum hit the highest levels since early May amid a combination of QE3 hopes and ongoing labor unrest in South Africa.
  
  Gold was last trading up by $6.50, or 0.39 percent, to $1661.15, while silver rose by $0.53, or 1.76 percent, to $30.36.
  
  Platinum gained $2.74, or 0.18 percent, to $1538.74 and palladium edged up by $2.50, or 0.4 percent, to $634.25.
  
  "The Fed's tone is totally different in the minutes from previous comments, and that helped gold break from the previous range and move into a higher price range ahead of the peak consumption season," said Chen Min, an analyst at Jinrui Futures in China.
  Gold up for seventh day after surprise Fed policy nod
  
  
• Crude oil is also rising on the back of the aforementioned Fed minutes. Brent was last trading up by $1.37, or 1.19 percent, to $116.28, while WTI gained $0.60, or 0.62 percent, to $97.86—after topping $98 earlier—a new three-month high.
  
  "Market sentiment after the Fed minutes suggests we'll see further price gains today," said Carsten Fritsch, an energy analyst at Commerzbank.
  Oil tops $116 on Fed stimulus hopes
  
  
• Natural gas was last trading down fractionally to $2.82, a loss of $0.01, or 0.18 percent, ahead of the EIA's Weekly Natural Gas Storage report. Inventories are expected to have increased by 38 billion cubic feet last week, according to analysts.
  Coal Plants' Victory Over EPA Is Muted by Low Gas Prices
  
  
• The grain complex is narrowly mixed, as corn sheds $0.05, or 0.63 percent, to $8.25/bushel, while soybeans edges down by $0.01, or 0.03 percent, to $17.48 and wheat rises by $0.02, or 0.22 percent, to $8.99.
  
  "Corn and soybean markets remain characterized by prospects of low yields in the USA as compared to last year," said grains consultancy Agritel.
  US soybeans hover near contract high, wheat firm
  
  
• Copper was last trading up by $0.05, or 1.17 percent, to $3.50/lb, as the industrial metal benefits from the broad-based buying in commodities.
  Copper hits month high on hopes for U.S., China easing
  
  
  

What to Watch For:

8:30 a.m. ET: Initial Jobless Claims

10:00 a.m. ET: New Home Sales (July)

10:30 a.m. ET: Weekly Natural Gas Storage Report