Written by Sumit Roy  |

September 11, 2012

Market Wrap: NatGas Surges 6%, Gold Near 6-Month High Ahead Of German Court Ruling, Dollar Plunges

Details

Commodities rose broadly.

A plunge in the U.S. dollar kept commodities climbing to the upside today. Natural gas was the best performer by far, as all eyes stayed 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 were no notable macroeconomic data released today.

In Europe, Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—remained well-behaved ahead of a court ruling in Germany that will determine whether the country's participation in the bailouts of fellow eurozone members is legal. Yields were last trading down by 1 basis point to 5.69 percent.

The U.S. Dollar Index fell by 0.68 percent to 79.86, a four-month low.

• Precious metals edged up to recent highs, as the dollar fell. Gold was last trading up by $6.38, or 0.37 percent, to $1732.63, while silver added $0.12, or 0.36 percent, to $33.48.
  
  Platinum gained $13.75, or 0.86 percent, to $1607.25 and palladium rose by $3.50, or 0.52 percent, to $671.
  
  
• Crude oil rose modestly today, as Brent added $0.42, or 0.37 percent, to $115.25, while WTI rose by $0.50, or 0.52 percent, to $97.04.
  
  "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.
  
  
• Natural gas was last trading up by $0.17, or 5.94 percent, to $2.98/mmbtu in anticipation of a much-lower-than-expected build in this week's inventory report.
  
  "Gas prices are including a calculation of another week of stingy [storage] injections, the result of recent shut-ins," analyst Mike Fitzpatrick said.
  
  
• The grain complex was mixed ahead of Wednesday's supply and demand data from the USDA. Corn was last trading up by $0.03, or 0.42 percent, to $7.84/bushel, while soybeans fell by $0.13, or 0.77 percent, to $17 and wheat shed $0.05, or 0.52 percent, to $8.64.
  
  "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.
  
  
• Copper was last trading up by $0.01, or 0.24 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."