Written by Sumit Roy  |

October 19, 2012

Week In Review: Gold & Silver Drop To 6-Week Lows After Forming Triple Tops; NatGas Hits New High

Details

We examine the latest developments in commodity markets and the week's performance.

Commodities mostly fell this week, led by precious metals to the downside. However, grains and natural gas managed to rise in the period. Stocks plunged on Friday due to a string of disappointing corporate earnings reports, but the S&P 500 managed to eke out a gain of about half a percent for the week as a whole.

Macroeconomic Highlights

The economic data this week was mostly encouraging. In the U.S., retail sales rose by 1.1 percent in September, better than the 0.8 percent increase that was expected. Industrial production in the month grew by 0.4 percent in September, besting the anticipated 0.2 percent.

Meanwhile, housing starts in the month of September jumped by 15 percent to 872K. That's well above the expected 770K, and is the highest level in over four years. Building permits surged 11.6 percent to 894K, above the anticipated 810K, and the best level in over four years.

While housing construction boomed in September, housing purchases fell slightly. Existing home sales fell by 1.7 percent to 4.75 million units annualized—just off the two-year high set in the previous month.

"There are a lot of reasons to be positive on housing," said Tom Simons, an economist at Jefferies Group. "Mortgage rates are near all-time lows, and inventories are at generational lows. If housing prices continue to rise, people are incentivized to get off the sidelines. It all sets up for continued improvement."

On the bearish side, 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.

Finally, 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.

Commodity Wrap