Written by Sumit Roy  |

October 18, 2012

Morning Call: Gold & Silver Drop After China GDP Data, Oil Eases As U.S. Initial Jobless Claims Spike

Details

Commodities mostly fall.

Commodities are mostly lower today after the Department of Labor reported that the number of people filing for unemployment benefits in the United States surged from 342K to 388K last week. The initial jobless claims measure has been extremely volatile over the past two weeks, injecting uncertainty into the outlook for the labor market.

Meanwhile, a highly anticipated batch of economic data from China came out close to expectations. The country's economy grew 7.4 percent year-over-year in the third quarter, matching analyst estimates. Still, that's down from 7.6 percent in the second quarter and the lowest rate since the first quarter of 2009.

In other China news, industrial production in September grew by 9.2 percent year-over-year, above the 9 percent that was anticipated and the 8.9 percent in August. Retail sales rose by 10 percent year-over-year, equal to expectations and down a tick from 10.1 percent in August.

Taking a look at currency markets, the U.S. Dollar Index was last trading up by 0.12 percent to 79.11.

• Gold and silver are back on the downside today. The yellow metal was last trading lower by $8.68, or 0.5 percent, to $1741.47, while the gray metal shed $0.37, or 1.12 percent, to $32.85.
  
  Platinum lost $16, or 0.96 percent, to $1649, and palladium fell by $3.80, or 0.58 percent, to $649.20.
  
  "Gold is trying to establish a foothold around the mid $1700s as we step into what is traditionally the busy season for gold demand in India," UBS analyst Edel Tully said.
  
  "Recently we've noted an improvement in Indian gold buying, but the interest has trailed off since Tuesday to settle about 11 percent below this year's average. The sharp price moves of late likely acted as a deterrent as physical buyers tend to prefer jumping in when prices are stable," she added.
  Gold softens in line with euro ahead of EU summit
  
  
• Crude oil is modestly lower, as Brent falls by $0.74, or 0.65 percent, to $112.48, while WTI sheds $0.55, or 0.6 percent, to $91.57. The spread between the two benchmarks stands at $20.91.
  
  Goldman Sachs now sees Brent prices averaging $110 in 2013, down from its previous forecast of $130 due to a more optimistic outlook for non-OPEC oil supply.
  Oil slips below $112, supply concerns ease
  
  
• Natural gas was last trading down by $0.01, or 0.32 percent, to $3.46/mmbtu ahead of the EIA's weekly storage report. The agency may report that inventories rose by 46 to 50 billion cubic feet last week, according to a survey of analysts by Platts.
  Ahead of the Bell: Natural gas supplies
  
  
• The grain complex is outperforming today. Corn was last trading up by $0.02, or 0.27 percent, to $7.48/bushel, while soybeans rose by $0.14, or 0.91 percent, to $15.23 and wheat gained $0.06, or 0.7 percent, to $8.62.
  
  "We have seen a general improvement in risk attitude," said Luke Mathews, commodities strategist at the Commonwealth Bank of Australia. 
  "We still have the case in grain and oilseed markets that despite the seasonal harvest pressure, the forecast for inventories remains very tight."
  Wheat up for 2nd day on dry weather worries
  
  
• Copper was last trading down by $0.01, or 0.25 percent, to $3.74/lb on Comex after the aforementioned neutral China data failed to inspire traders to make big bets in either direction.
  
  "Investors are pricing forward contracts higher as they feel copper's outlook for the rest of the year has improved, based on recent global economic data," said one trader. "But we have not seen a meaningful pick-up in spot demand yet."
  Copper near 1-week high on strong euro, growth optimism
  
  

What to Watch For:

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

10:30 a.m. ET: Weekly Natural Gas Storage Report