Written by Sumit Roy  |

September 20, 2012

Morning Call: Gold Drops As Dollar Jumps Following Weak Eurozone, China Data; Brent Rebounds Modestly

Details

With the exception of oil, commodities are lower.

Commodities are broadly lower today after the release of disappointing economic data from around the world. HSBC's China Manufacturing PMI for September ticked up from 47.6 to 47.8, but remained in contraction territory for an 11th-straight month.

The equivalent gauge for the eurozone ticked up from 45.1 to 46—its 13th-straight month below 50—the level that separates contraction from expansion.

In the U.S., the number of people filing for unemployment benefits fell by 3K to 382K last week.

The U.S. Dollar Index jumped 0.58 percent to 79.52.

• The dollar's advance is pressuring precious metals. Gold was last trading down by $6.60, or 0.37 percent, to $1763.80, while silver shed $0.17, or 0.49 percent, to $34.44.
  
  Platinum lost $22.76, or 1.39 percent, to $1617.49 and palladium dropped $5.90, or 0.88 percent, to $665.85.
  
  "The lack of follow-through following the BoJ announcement of additional stimulus yesterday seems to indicate that investors have what they need at this stage, and a correction might be required to attract additional demand," Saxo Bank Vice President Ole Hansen said. "Physical demand looks lackluster, so it is purely up to the investment community to drive this forward."
  Gold retreats from 6-1/2 month high as dollar firms
  
  
• Crude oil is outperforming other commodities after plunging from Monday through Wednesday. Brent was last trading up by $0.39, or 0.36 percent, to $108.58, while WTI fell $0.31, or 0.34 percent, to $91.67.
  
  "We saw that significant increase in crude inventories in the U.S., and that's probably because the Gulf platforms are coming back on-stream post Isaac," said David Lennox, an analyst at Fat Prophets. "There is still some weakness in the demand side of the equation."
  Oil Falls to Six-Week Low on China Slowdown, Supply Surge
  
  
• Natural gas was last trading up by $0.03, or 1.19 percent, to $2.80/mmbtu ahead of the EIA's Weekly Storage report, which may show that operators injected 64 billion cubic feet to 68 bcf into storage last week, according to a survey of analysts by Bloomberg.
  Ahead of the Bell: Natural gas supplies
  
  
• Grains are modestly lower, as corn sheds $0.04, or 0.56 percent, to $7.52/bushel, while soybeans loses $0.07, or 0.43 percent, to $16.62 and wheat falls by $0.03, or 0.37 percent, to $8.78.
  
  "I think there is a bit of pressure on prices because of the harvest," said Serene Lim, a commodities analyst at Standard Chartered Bank. "But we are still bullish on U.S. crops and we are recommending to our clients to buy on any dips."
  Soybeans little changed, corn slips on harvest pressure
  
  
• Copper was last trading down by $0.07, or 1.83 percent, to $3.76/lb amid the broad-based sell-off in financial markets.
  
  "For copper, the market was stalling for more than three months in a tight range. Then you had QE3 and things improved. But in the long run, you need fundamentals to recover and we need to see an improvement in China," said Andrey Kryuchenkov, analyst at VTB.
  
  "I am still upbeat on China's prospects towards the end of the year and I think they will stabilise their growth to maybe below 8 percent. And that is important for metals," he added.
  Copper falls after weak China, eurozone economic data
  
  

What to Watch For:

8:30 a.m. ET: Initial Jobless Claims