Written by Sumit Roy  |

September 05, 2012

Market Wrap: Gold ($1692) Edges Lower, Copper Rallies To 6-Week High Ahead ECB Bond Buying Decision

Details

Most commodities fell on profit-taking, but copper and WTI rallied.

Commodities mostly fell today on profit-taking ahead of Thursday's monetary policy decision by the European Central Bank, in which the ECB is expected to resume its controversial bond-buying program in an effort to bring down stubbornly high interest rates on Spanish and Italian debt.

Ahead of the decision, Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—fell by 16 basis points to 6.41 percent.

Meanwhile, investors also awaited the U.S. nonfarm payrolls report scheduled for release on Friday. The data may be a crucial variable that influences whether the Federal Reserve announces new monetary stimulus measures at its next policy meeting on Sept. 13.

The U.S. Dollar Index was last trading at 81.23, a loss of 0.1 percent on the session.

• Gold and silver were lower today, as traders took profits after the recent rally. The yellow metal was last trading down by $3.75, or 0.22 percent, to $1692, while the gray metal shed $0.17, or 0.51 percent, to $32.18.
  
  Platinum fell by $2.50, or 0.16 percent, to $1567.25 and palladium edged up by $1.75, or 0.27 percent, to $643.
  
  "The market is confident something will come from the Fed, but it doesn't expect massive quantitative easing. The ECB will have much more of an impact because it will prevent Spanish and Italian yields from going very high," Jesper Dannesboe, senior commodity strategist at Societe Generale, told Reuters.
  
  
• Crude oil was mixed today, as Brent shed $0.83, or 0.73 percent, to $113.35, while WTI edged up by $0.22, or 0.23 percent, to $95.52.
  
  "The somewhat disappointing ISM figure in the U.S. [from Tuesday] clouds the demand outlook," said Ric Spooner, a chief market analyst at CMC Markets. "It's showing a picture of relatively weak conditions and the possibility of softness in production output for the next few months. For oil, that comes against a background where prices have risen a long way already and there's adequate supply capacity."
  
  
• Natural gas was last trading down by $0.06, or 2.17 percent, to $2.79/mmbtu.
  
  "Future gas demand in natural gas vehicles has enormous upside potential, led by private sector initiatives, with or without federal government assistance," said PIRA, an energy consulting firm.
  
  
• Grains fell across the board today. Corn was last trading down by $0.17, or 2.11 percent, to $7.90/bushel, while soybeans fell by $0.26, or 1.48 percent, to $17.45 and wheat lost $0.21, or 2.37 percent, to $8.46.
  
  "I think we are seeing a technical pullback today in soybeans, corn and wheat with some squaring and reduction of positions before some high risk events such as the possible European Central Bank bond announcement on Thursday and the U.S. jobs reports on Friday," said Ole Hansen, head of commodity strategy at Saxo Bank.
  
  
• Copper was last trading up by $0.06, or 1.61 percent, to $3.52/lb on Comex. That's the highest level in six weeks.
  
  "The markets have been pumped up on the belief that the ECB will announce at its meeting tomorrow that it will restart its bond buying program to address the spike in borrowing cost in some of the weaker euro zone countries," Societe Generale analyst Robin Bhar said.