Written by Sumit Roy  |

September 06, 2012

Market Wrap: Gold Tops $1700 After ECB Decision, Oil And NatGas Rise Ahead Of Key US Jobs Data

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Commodities follow stocks higher.

Stocks spiked to fresh four-year highs and commodities rose after the European Central Bank announced it will resume its bond-buying program in an effort to bring down stubbornly high interest rates on Spanish and Italian debt. The decision was expected, but nonetheless welcomed by markets.

In his remarks, ECB President Mario Draghi said the central bank's bond purchases are potentially unlimited, but that they will be fully sterilized. In other words, the ECB will not expand its balance sheet and partake in quantitative easing as the U.S. Federal Reserve has done.

Spanish 10 year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—fell by 38 basis points to 6.03 percent in response to the news.

Meanwhile, a strong U.S. employment figure from ADP, a payroll processor, was an encouraging sign ahead of the official government nonfarm payrolls report on Friday. Employers added 201K jobs in August, said ADP, well above that anticipated 140K.

In other U.S. jobs news, the number of people filing for unemployment benefits fell to 365K last week, down more than anticipated.

The ISM non-manufacturing gauge ticked up from 52.6 to 53.7, better than expected.

The U.S. Dollar Index fell by 0.18 percent to 81.09.

• The ECB's move to buy bonds spurred another leg higher in precious metals prices. Gold and silver hit the highest levels since March and April, respectively. The yellow metal was last trading up by $11.60, or 0.69 percent, to $1704.60, while the gray metal jumped $0.38, or 1.19 percent, to $32.65.
  
  Platinum gained $15, or 0.95 percent, to $1586.75 and palladium rose by $3.25, or 0.5 percent, to $648.25.
  
  "What is clear is the break of $1,700 is going to pull in some additional momentum-following money. I think it will give further encouragement to those who are invested in physical [gold] and it is adding confidence to those who are already exposed...so this could be sustained," said Tom Kendall, an analyst at Credit Suisse.
  
  
• Crude oil rose after the EIA said that inventories plunged last week amid output disruptions related to Hurricane Isaac.
  
  U.S. crude oil inventories decreased by 7.5 million barrels, gasoline inventories decreased by 2.3 million barrels, distillate inventories increased by 1 million barrels and total petroleum inventories decreased by 9.6 million barrels, said the EIA.
  
  Brent was last trading up by $0.59, or 0.52 percent, to $113.68, while WTI gained $0.66, or 0.69 percent, to $96.
  
  
• Natural gas was last trading up by $0.03, or 1.22 percent, to $2.83/mmbtu after the EIA said that operators injected 28 billion cubic feet into storage last week, close to the lower end of expectations that were calling for a build between 23 bcf and 36 bcf.
  
  Inventories are now 395 bcf above the year-ago level and 329 bcf above the five-year average, according to the EIA.
  
  Meanwhile, 1.2 bcf/d of natural gas remained offline in the Gulf of Mexico in the wake of Hurricane Isaac, according to the Bureau of Safety and Environmental Enforcement.
  
  
• Grains were mixed today, as corn added $0.06, or 0.79 percent, to $7.96/bushel, while soybeans edged down by $0.01, or 0.06 percent, to $17.47 and wheat jumped $0.23, or 2.66 percent, to $8.68.
  
  "Although we should remain vigilant, current prices do not justify talk of a world food crisis. But the international community can and should move to calm markets further," FAO Director General Graziano da Silva said.
  
  
• Copper was last trading down by $0.01, or 0.33 percent, to $3.52/lb on Comex.
  
  "There is very little demand," said a Shanghai-based trader. "The premium on imported copper is only about $50, reflecting low buying interest."