Written by Sumit Roy  |

October 18, 2012

Market Wrap: NatGas Surges After Inventory Report, Gold Falls Amid Weak Data, Goldman Sees WTI-Brent Spread At $4

Details

Commodities mostly fell.

Commodities fell broadly today after disappointing economic data and a big earnings miss by Google. The tech giant reported earnings that were below expectations during the middle of the trading session—ahead of the scheduled after-the-close release time—due to an error. Shares of the company plunged almost 10 percent, dragging the stock market lower.

In economic news, 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 rose by 0.37 percent to 79.31.

• Gold and silver were back on the downside today. The yellow metal was last trading lower by $8.65, or 0.49 percent, to $1741.50, while the gray metal shed $0.43, or 1.28 percent, to $32.80.
  
  Platinum lost $24.25, or 1.43 percent, to $1641.25, and palladium fell by $9.50, or 1.45 percent, to $643.50.
  
  "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.
  
  
• Crude oil was modestly lower, as Brent fell by $0.81, or 0.72 percent, to $112.41, while WTI shed $0.06, or 0.07 percent, to $92.06. The spread between the two benchmarks stands at $20.35.
  
  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. The firm expects the WTI-Brent spread to fall to as low as $4 during 2013.
  
  
• Natural gas surged by $0.12, or 3.43 percent, to $3.59/mmbtu after the EIA's Weekly Storage report. The agency said that operators injected 51 billion cubic feet into inventories last week, which was close to most analyst expectations.
  
  "I was expecting a lower number based on the weather last week. Milder weather now could make it difficult in the near term to sustain rallies, but the market doesn't feel like it wants to break down," said Steve Platt at Archer Financial.
  
  
• The grain complex outperformed today. Corn was last trading up by $0.14, or 1.91 percent, to $7.60/bushel, while soybeans rose by $0.31, or 2.05 percent, to $15.41, and wheat gained $0.13, or 1.55 percent, to $8.70.
  
  "We still have the case in grain and oilseed markets that despite the seasonal harvest pressure, the forecast for inventories remains very tight," said Luke Mathews, commodities strategist at the Commonwealth Bank of Australia.
  
  
• Copper was last trading down by $0.02, or 0.43 percent, to $3.73/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."