Written by Sumit Roy  |

October 19, 2012

Morning Call: Silver Drops To 6-Week Low As Correction Continues, NatGas Advances To 10-Month High, Oil Rises

Details

Commodities trade mixed.

Commodities are mixed, as precious metals and copper fall, while energy and grains rise. Data on U.S. existing home sales are due out at 10 a.m. ET, and may shed light on the pace of recovery in the housing market. Earlier this week, figures showed that housing construction was picking up, but the existing home sales data will give indications about the demand for housing.

In other news, General Electric and McDonald's reported disappointing earnings for the third quarter, sending shares of those companies lower. That's putting pressure on the broader stock market.

Taking a look at currencies, the U.S. Dollar Index was last trading up by 0.19 percent to 79.52.

• The correction in gold and silver continues today. The yellow metal was last trading down by $6.62, or 0.36 percent, to $1734.68, while the gray metal lost $0.40, or 1.2 percent, to $32.40—a six-week low.
  
  Platinum fell by $8.76, or 0.53 percent, to $1631.99, while palladium edged down by $4.95, or 0.77 percent, to $638.55.
  
  "The path of least resistance for gold appears lower, at least in the near term," analysts at HSBC said. "We do not see a compelling reason for sharply lower prices, but the market may drift lower, as trading volume in recent days has been light."
  
  "In the absence of a convincing reason to rally, short-term investors may take the opportunity to sell before the weekend, especially if coming economic data continue to be positive," they added.
  Gold dips as stocks fall, heads for second weekly loss
  
  
• Crude oil is higher today, but the commodity remains locked in a relatively tight range. According to Bloomberg, prices for WTI have had daily price settlements within $0.25 of the prior close for the past five sessions—the longest such streak in over a decade. The $92.50 level, in particular, has offered strong resistance for the benchmark.
  
  WTI was last trading up by $0.21, or 0.23 percent, to $92.31, while Brent added $0.47, or 0.42 percent, to $112.89.
  
  "The macro-economic side is not showing big enough figures to pull the market up significantly," said Thina Saltvedt, analyst at Nordea Bank. "Any move upwards will be driven by the political risk increasing or further supply disruptions such as the [Keystone] pipeline in the U.S. having to close for three days."
  Oil Heads for Weekly Gain as TransCanada Shuts Keystone
  
  
• Natural gas was last trading up by $0.06, or 1.62 percent, to $3.65—the highest level in 10 1/2 months.
  
  As we wrote in a report on Thursday, natural gas is poised to continue higher as traders speculate this winter heating season will be more bullish than last year's—which was the fourth-warmest on record. Prices are holding up well despite forecasts for mild weather for the rest of October.
  Natural Gas Near $3.60 As Inventory Surplus Dwindles & Rig Count Decline Continues
  
  
• The grain complex is higher, as corn adds $0.07, or 0.85 percent, to $7.67/bushel, while soybeans rises by $0.03, or 0.21 percent, to $15.49 and wheat gains $0.12, or 1.32 percent, to $8.80.
  
  "The U.S. harvest season is coming to an end and we could see corn and soybean prices rally next week," said Serene Lim, commodities analyst at Standard Chartered Bank.
  Soy on track for 1st weekly gain since early Sept
  
  
• Copper was last trading down by $0.05, or 1.38 percent, to $3.69/lb on Comex.
  
  "We had a big rally in base metal prices going into September on anticipation of QE3, the implementation of QE3 and also the raft of policy initiatives announced in China and measures taken by the ECB," said Nic Brown, head of commodities research at Natixis.
  
  "Just don't expect this surge in prices to be sustainable. It was not a real reflection of improved demand in China and it is no surprise to us that base metals prices have come off quite significantly," he added.
  Copper pressured by weak euro, Chinese demand uncertainty
  
  
  

What to Watch For:

10 a.m. ET: Existing Home Sales (September)

1 p.m. ET: Baker Hughes Rig Count