Written by Sumit Roy  |

September 12, 2012

Morning Call: Gold & Silver Jump To New 6-Month Highs After German Court Ruling, Corn Falls After USDA Report

Details

The surge in precious metals continues today.

Precious metals are surging, while other commodities also advance, one day ahead of the most anticipated Federal Reserve policy decision of the year. Expectations for a third round of quantitative easing (QE3) have grown significantly, and anything short of that when the Fed makes its decision on Sept. 13 may be seen as a disappointment by markets.

Today news flow is light, with no major macroeconomic data scheduled for release.

In Europe, the high court in Germany ruled that the country's participation in the bailout of other eurozone members was legal, but that any future increase in the size of the European Stability Mechanism (bailout fund) would need to be ratified by parliament.

Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt crisis fears—continued to decline and were last trading down by 10 basis points to 5.6 percent.

The U.S. Dollar Index fell 0.19 percent to 79.71 after reaching a four-month low at 79.52 earlier.

• Gold and silver climbed to fresh six-month highs today amid the drop in the U.S. dollar and on expectations that the Fed will announce QE3 on Thursday. The yellow metal was last trading up by $10.65, or 0.61 percent, to $1742.85, while the gray metal added $0.30, or 0.88 percent, to $33.79.
  
  Platinum surged $38.49, or 2.4 percent, to $1644.49 and palladium edged up by $8.25, or 1.23 percent, to $678.50.
  
  "The market has fully priced in a positive outcome from the German court," said Nick Trevethan, senior commodity strategist at ANZ. "It has also priced in fairly substantial expectations for QE."
  Perfect Storm Of QE3 & Fiscal Cliff May Send Gold Above $2000
  
  
• Crude oil is higher ahead of the EIA's Weekly Petroleum Status report. The less authoritative API report showed that crude inventories increased by 0.2 mmbbl, gasoline inventories fell by 4.2 mmbbl and distillate inventories rose by 2.5 mmbbl last week.
  
  Brent was last trading up by $0.56, or 0.49 percent, to $115.96, while WTI gained $0.06, or 0.06 percent, to $97.23.
  
  "The [German court ruling is] supportive for the oil market," said Ric Spooner, chief market analyst at CMC Markets. "With the Fed, the issue is what they do and how big it's going to be. Without supply shocks, we are probably fairly close to the top end of the range for oil."
  Oil Trades Near Three-Week High on Stimulus Hopes
  
  
• Natural gas is taking a breather after surging over 6 percent in the prior session. Expectations that the EIA will report another much-lower-than-normal build in inventories in Thursday's report are providing support. Gas was last trading at $2.99/mmbtu, unchanged on the session.
  
  "We thought utility demand would likely limit inventory [growth], and that's what's happened," said Teri Viswanath, senior natural gas strategist at BNP Paribas. "If we think about where storage will be at year-end, we might have erased the storage surplus entirely."
  Natural Gas Rallies 6.4%
  
  
• Grains traded mixed after the USDA's latest data on supply and demand. The soybeans harvest will be the smallest in nine years at 2.634 billion bushels, according to the latest department forecast. That's below the 2.659 billion that analysts had expected.
  
  However, the corn harvest is projected to total 10.727 billion bushels, above the 10.4 billion that was anticipated. Still, that's the smallest harvest in six years.
  
  Corn was last trading down by $0.15, or 1.95 percent, to $7.67/bushel, while soybeans jumped $0.25, or 1.47 percent, to $17.22 and wheat fell by $0.01, or 0.15 percent, to $8.58.
  
  "A third straight year of reduced U.S. production means soybeans buyers face an unprecedented tight supply for the next 12 months," said Jerry Gidel, chief feed-grain analyst at Rice Dairy LLC. "The short U.S. crop now puts all the focus on a successful start to the South American growing season for the next three months to bolster world supplies."
  Grains, Soybeans May Rise on Prospects for Smaller Crop Forecasts
  
  
• Copper was last trading at $3.72/lb, up 0.09 percent after hitting $3.74 earlier—the best level since early May.
  
  "We've now got a situation where the macro environment is beginning to turn more positive. Policy is becoming more positive for the base metals, so I think that is having the bigger influence on prices," said Barclays analyst Gayle Berry. "If we do get a big announcement from the Fed that the market perceives to be positive there is still further upside to metals prices."
  Copper rises for 4th session after German ruling
  
  

What to Watch For:

10:30 a.m. ET: Weekly Petroleum Status Report