Written by Sumit Roy  |

September 11, 2012

Morning Call: Gold ($1732), Copper Edge Higher In Anticipation Of QE3, Goldman Says WTI Spread To Narrow

Details

Most commodities rise.

Commodities are edging higher today, as all eyes stay fixed on Thursday's policy decision from the Federal Reserve. Many market participants, including major investment banks such as Goldman Sachs and J.P. Morgan, are forecasting that the central bank will unveil a third round of quantitative easing (QE3) at the Sept. 13 meeting.

There are no notable macroeconomic data scheduled for release today.

In Europe, Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—remain well-behaved following last week's ECB decision to resume its bond-buying program. Yields were last trading up by 2 basis points to 5.72 percent.

The U.S. Dollar Index fell by 0.25 percent to 80.20.

• Precious metals are edging up to recent highs, as traders buy ahead of the Fed's decision. Gold was last trading up by $5.78, or 0.33 percent, to $1732.03, while silver added $0.21, or 0.61 percent, to $33.57.
  
  Platinum gained $5.24, or 0.33 percent, to $1598.74 and palladium rose by $4.50, or 0.67 percent, to $672.
  
  "If additional Fed action does not happen, then the monetary side of gold's story would come under pressure, risking a breakdown closer to $1,625" an ounce, Richard Hastings, a macro strategist at Global Hunter Securities told MarketWatch.
  Fed holds power to halt gold, silver rally
  
  
• Crude oil is little changed today, as Brent sheds $0.13, or 0.11 percent, to $114.68, while WTI rises by $0.10, or 0.11 percent, to $96.65.
  
  "Prices are likely to break to the upside," Michael Poulsen, an analyst at Global Risk Management, told Bloomberg. "Oil fundamentals are balanced. A rise in prices would mostly be fueled by more money flooding in from the Fed."
  
  Meanwhile, Goldman Sachs believes that the spread between WTI and other benchmarks will narrow.
  
  "We expect that Bakken and Canadian crude oil will need to continue to flow to Cushing in the fourth quarter 2012, and WTI prices will need to rise back above Canadian and Bakken prices in order to motivate these flows," said Goldman's David Greely.
  Oil Trades Near Three-Week High on Outlook for Economic Stimulus
  
  
• Natural gas was last trading up by $0.04, or 1.35 percent, to $2.85/mmbtu in anticipation of a much-lower-than-expected build in this week's inventory report.
  Canada Natural Gas Climbs as U.S. Inventory Surplus Narrows
  
  
• The grain complex is narrowly mixed ahead of Wednesday's supply and demand data from the USDA. Corn was last trading up by $0.02, or 0.29 percent, to $7.83/bushel, while soybeans fell by $0.01, or 0.03 percent, to $17.13 and wheat shed $0.03, or 0.32 percent, to $8.66.
  
  "Everyone is looking forward to the USDA report and we are likely to see pressure on corn prices ahead of the report as much of the bad news has been factored in," said Lynette Tan, investment analyst at Phillip Futures.
  Soy at 2-week low on harvest pressure, pre-USDA caution
  
  
• Copper was last trading up by $0.01, or 0.15 percent, to $3.71/lb, remaining near the highest levels in four months.
  
  "Hopes for additional monetary easing apparently trump weak economic data in the current environment," said analysts at Credit Suisse. "In this context, this week's Fed meeting will be a major event risk. The announcement of further easing could trigger additional price gains—particularly for metals."
  Copper hits four-month high on U.S., China stimulus hopes
  
  

What to Watch For:

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