Written by Sumit Roy  |

October 23, 2012

Market Wrap: Gold Plummets Below $1710, Silver Below $32 Amid Risk Aversion, Copper Hits 6-Week Low

Details

Commodities fell broadly.

Another round of disappointing corporate earnings announcements sent commodities and stocks tumbling. Only natural gas and soybeans were able to rally in the session.

While about 60 percent of the S&P 500 companies that have reported earnings thus far have beaten analysts' estimates, guidance for next quarter and 2013 has been soft amid weak growth in Europe and China. Additionally, many companies are expressing concern about the coming fiscal cliff in the U.S.

"It was ever so modest and ever so subtle but there was a shift to the markets really starting to trade on U.S. economic and U.S. company fundamentals and the market didn't seem to care much about what central banks were doing or what was going on in Europe," said Keith Bliss, senior vice president at Cuttone & Co in New York. "Then all of a sudden—wham—we get weaker earnings this quarter and it refocuses everybody's attention on the global economy."

Taking a look at currency markets, the U.S. Dollar Index rose by 0.43 percent to 80.

• Gold and silver fell to the lowest levels since early September, as investor risk appetite retreated, prompting liquidation of the metals. The yellow metal was last trading down by $23.30, or 1.34 percent, to $1706.30, while the gray metal fell by $0.78, or 2.4 percent, to $31.67.
  
  Platinum fell by $38, or 2.37 percent, to $1568 and palladium shed $32, or 5.13 percent, to $592.
  
  "You've had QE priced in and what we're seeing now is a bit of a retracement following that," Deutsche Bank analyst Daniel Brebner said. "We have a pause in monetary policy action—it's very unlikely we're going to see anything in the U.S. and China while there is political transition.
  
  "Conditions economically remain tenuous ... there are concerns with respect to growth, and therefore the potential for deflation is starting to pick up a little bit," he added. "This is really causal to gold's decline. We're likely to see some support around the 1,700 level, but right now I'd characterize the market as being in a trading range, with some downward pressure within that."
  
  
• Crude oil joined today's broad-based pullback. Brent was last trading lower by $1.25, or 1.14 percent, to $108.19, while WTI lost $1.99, or 2.24 percent, to $86.66.
  
  "There is a correlation between the equity markets and the oil price," Michael Hewson, analyst at CMC Markets, said. "We've had various companies missing price forecasts and these concerns about the future outlook for earnings is keeping a lid on oil prices."
  
  
• Natural gas advanced to $3.53/mmbtu, a gain of $0.07, or 2.11 percent, after tumbling on Monday. The latest weather forecasts continue to show colder-than-normal temperatures across the population-heavy areas of the United States at the end of the month.
  
  
• The grain complex was mixed, as corn shed $0.06, or 0.79 percent, to $7.55/bushel, while soybeans rose by $0.03, or 0.21 percent, to $15.50 and wheat fell by $0.10, or 1.3 percent, to $8.68.
  
  "The [wheat] market is drifting a little as confirmation is awaited about export restrictions by Ukraine," one European trader said.
  
  
• Copper was last trading down by $0.06, or 1.55 percent, to $3.57/lb on Comex, the lowest level since September 7.
  
  "Exogenous factors are still in control and the market is still waiting for some direction from China or elsewhere," said analyst Leon Westgate at Standard Bank. "But I'm not sure there's any reason for China to be very enthusiastic about switching the (stimulus) taps back on. I would expect more concrete plans to emerge next year, rather than this year, particularly as the data hasn't been that bad."