Written by Sumit Roy  |

October 09, 2012

Market Wrap: Brent Oil Surges To 3-Week High, Gold Trades Flat As Dollar Jumps After Downbeat Economic Forecast

Details

Commodities mostly rose thanks to a spike in oil prices, but gold and silver were little changed.

Commodities mostly rose today, led by energy, but a jump in the U.S. dollar kept gold and silver from rallying significantly. In today's news, the International Monetary Fund cut its forecast for global growth this year and next, to 3.3 percent and 3.6 percent, respectively. Growth of 3.3 percent this year would be the slowest rate since 2009, and down from 4 percent in 2011.

The U.S. Dollar Index rose by 0.6 percent to 80.02 amid safe-haven buying.

• The dollar's rally capped precious metals prices. Gold was last trading unchanged at $1765.95, while silver rose by $0.06, or 0.17 percent, to $33.97.
  
  Platinum shed $3.12, or 0.18 percent, to $1690.25 and palladium added $0.5, or 0.08 percent, to $658.50.
  
  "The return of dollar strength has stalled the move in gold, but it's very temporary, we're still on track to see more gains," said Deutsche Bank's Michael Lewis.
  
  
• Crude oil surged today, as Brent rose by $2.70, or 2.41 percent, to $114.52—the highest level since September 17—while WTI gained $2.94, or 3.29 percent, to $92.27.
  
  The spread between the two benchmarks reached as high as $22.85 today—the widest level in a year. A glut of crude in the U.S. Midwest continues to saturate the landlocked region with oil, depressing WTI.
  
  "It's a political risk premium coming into the market now, not really supported by fundamental data," said Andy Sommer, oil market analyst with EGL. "If you look at the demand side, prices should be a bit lower than they are currently. But the risk, or fear, that this Turkey-Syria conflict might spread further in the Arab world is increasing that risk premium."
  
  
• Natural gas was last trading up by $0.06, or 1.85 percent, to $3.47/mmbtu.
  
  Weather forecasts have shifted from projections of colder-than-normal temperatures to warmer-than-normal temperatures for the middle and end of October. Obviously, weather is fickle; thus, traders will continue to keep a close eye on the latest temperature forecasts.
  
  
• The grain complex was higher today. Corn was last trading up by $0.01, or 0.1 percent, to $7.43/bushel, while soybeans added $0.02, or 0.15 percent, to $15.53 and wheat rose by $0.02, or 0.15 percent, to $8.67.
  
  "Corn has risen because of the expectation that the [Thursday] USDA report will show a reduction in yields," said Lynette Tan, analyst at Phillip Futures in Singapore. "Soybeans had fallen in the previous sessions, so I think today's rise is a correction to that."
  
  
• Copper was last trading up fractionally to $3.72/lb on Comex.
  
  "Sentiment and prices are still very downbeat and I wouldn't be surprised if prices rally towards the end of the year on better liquidity and improving sentiment," said Eugen Weinberg, head of commodity research at Commerzbank.