Written by Sumit Roy  |

October 16, 2012

Market Wrap: Gold & Silver Bounce As Dollar Falls; WTI-Brent Spread Narrows; NatGas Drops

Details

Commodities traded mixed.

Equities surged for a second session, but commodities could only put in a mixed performance today. Stocks have been benefiting from strong corporate earnings announcements, while commodities await more clarity on the economic outlook.

In that regard, today's economic news was on the positive side. Industrial production in the U.S. grew by 0.4 percent in September, besting the 0.2 percent that was expected.

Meanwhile, the consumer price index in the U.S. grew by 2 percent year-over-year in September, up from 1.7 percent in the prior month and slightly higher than the anticipated 1.9 percent. Core prices—excluding food and energy—also grew by 2 percent year-over-year.

The U.S. Dollar Index fell by 0.43 percent to 79.40.

• The dollar's decline helped gold and silver recover some of their recent losses. The yellow metal was last trading up by $7.20, or 0.41 percent, to $1744.75, while the gray metal added $0.17, or 0.5 percent, to $32.89.
  
  Platinum traded unchanged at $1640.25 and palladium rose by $5.50, or 0.87 percent, to $639.
  
  "Gold rose sharply from mid-August onwards on expectations of a further round of quantitative easing in the U.S.," BNP Paribas Analyst Anne-Laure Tremblay said. "Since mid-September, the upward trend [has] stalled alongside renewed concerns about weak economic growth, particularly in China. Uncertainty surrounding the euro zone sovereign debt crisis is also weighing on sentiment."
  
  
• Crude oil was mixed, as Brent shed $0.81, or 0.7 percent, to $114.99, while WTI added $0.30, or 0.33 percent, to $92.15. That brings the WTI-Brent spread to $22.84, down from the $24.28 high from Monday.
  
  "The Brent market has been inflated by declining North Sea production and hiccups in that production, like the recent problems with Buzzard," said Christopher Bellew, senior broker at Jefferies Bache. "The price of WTI is also being distorted by the huge increase in U.S. domestic oil production."
  
  
• Natural gas fell by $0.05, or 1.55 percent, to $3.43/mmbtu.
  
  "Without early heating-season demand, the market is starting to balance out," said Gene McGillian, analyst and broker at Tradition Energy. "The buyers are bailing out."
  
  
• The grain complex traded narrowly mixed after falling sharply over the past two sessions. Corn was last trading down by $0.01, or 0.14 percent, to $7.36/bushel, while soybeans gained $0.06, or 0.37 percent, to $14.98 and wheat fell by $0.01, or 0.14 percent, to $8.46.
  
  "Today's [action] is largely driven by bargain-hunting as end-users are taking this opportunity to lock in supplies," said Lynette Tan, analyst at Phillip Futures. "Corn supplies are going to be very tight and any dip in prices will allow importers to buy."
  
  
• Copper was last trading up by $0.01, or 0.14 percent, to $3.71/lb on Comex.
  
  "Market positioning is relatively light and, whilst the recent economic data out of the U.S. has been good, it is firmer evidence of a turn in China that will drive base metals further from here," Marex Spectron Macro Strategist Guy Wolf said.