Written by Sumit Roy  |

August 28, 2012

Morning Call: Gold Rises As Sinking Dollar Supports, Oil Rebounds On Hurricane Outage, NatGas Falls

Details

Gold and oil rise, while platinum and natural gas fall.

Once again, commodities are narrowly mixed, as all eyes stay fixed toward Friday, when Fed Chairman Ben Bernanke will make his annual speech in Jackson Hole. There are no notable macroeconomic data releases scheduled for today.

In Europe, Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—rose by 5 basis points to 6.43 percent.

The U.S. Dollar Index fell by 0.3 percent to 81.41.

• The drop in the U.S. dollar is helping to keep gold close to unchanged despite a notable decline in platinum prices. The South African government hopes that it can mediate a peace agreement between striking workers and their employer, the No. 3 platinum miner—Lonmin—by Wednesday. That would be the first step in negotiating a compromise and ending a feud that has left 44 dead.
  
  Gold was last trading up by $1.10, or 0.07 percent, to $1665.20, while silver rose by $0.22, or 0.72 percent, to $30.94.
  
  Platinum dropped $20.10, or 1.3 percent, to $1524.40 and palladium shed $9.10, or 1.4 percent, to $641.40.
  
  "Although South Africa was only the world's fifth-largest producer of gold, producing 186.8 tons last year, a prolonged supply outage would no doubt have far-reaching consequences, especially since investment demand is currently gathering pace again and thus removing gold from the market," said analysts at Commerzbank.
  Gold holds near four-month high ahead of central bank meeting
  
  
• Crude oil is recovering from the prior session's losses, as Tropical Storm Isaac bears down on the Gulf Coast. According to the last update from the Bureau of Safety and Environmental Enforcement, close to 1.1 mmbbl/d, or 78 percent, of Gulf of Mexico output has been temporarily shut in due to the storm.
  
  Brent was last trading up by $0.21, or 0.19 percent, to $112.47, while WTI added $0.35, or 0.37 percent, to $95.82.
  
  "Crude trade will remain jittery this week as storm-related disruptions and refinery and storage tank fires in Venezuela keep investors on edge," said Andrey Kryuchenkov, an analyst at VTB Capital, told Bloomberg. "On top of that we have expectations of action from central bankers."
  Oil Rises on U.S. Supply Forecast, Venezuela Blaze
  
  
• Unlike oil, natural gas is not garnering support from Tropical Storm Isaac, as the demand-reducing cooling effects of the storm outweigh the loss of production. Close to 2.2 bcf/d, or 48 percent, of Gulf natural gas output has been shut in due to the storm.
  
  Natural gas prices were last trading down by $0.03, or 0.94 percent, to $2.63/mmbtu.
  Most Coal-to-Gas Switching in U.S. Permanent, Moody's Says
  
  
• Grains are lower today, as corn falls by $0.05, or 0.66 percent, to $7.89/bushel, while soybeans sheds $0.16, or 0.9 percent, to $17.14 and wheat loses $0.04, or 0.46 percent, to $8.58.
  
  "Normally at this time of the year, the market is under "Harvest pressure" and the prices start to go down," French analyst Agritel said. "Still, a number of operators remain skeptical about the potential drop in prices, given the current tense situation."
  Soybeans nearly flat, pausing after drought rally
  
  
• Copper was last trading down by $0.03, or 0.85 percent, to $3.45/lb on Comex.
  
  "The focus is now on Jackson Hole, but with U.S. data of late not looking too bad the Fed may well want to keep its powder dry," said analysts at FastMarkets. "If no QE is announced then there is room for disappointment. As such, we would expect trading this week to be nervous and choppy."
  Copper drops on economy fears; central bank action eyed
  
  

What to Watch For:

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