Commodities: Gold, oil strengthen but corn futures plunge on USDA data

Gold futures stayed well above the $1,100 an ounce level on Wednesday, as corn futures tumbled on US data and another currency devaluation by China in as many sessions hammered selected base metal contracts.

At 1632 BST, COMEX gold for December delivery was up 1.42% or $15.70 to $1,123.40 an ounce, while spot gold was up 1.46$ or $16.20 to $1,125.15. COMEX silver for September delivery was also up 1.61% or 25 cents to $15.53 an ounce, while spot platinum, beleaguered by oversupply sentiment, finally capped the $1,000 an ounce level, up 1.64% or $16.23 to $1,003.08 an ounce.

Earlier, China followed up the previous session’s yuan devaluation by announcing another policy reset on Wednesday, lowering the daily midpoint for the currency down 1.6% to 6.3306 against the dollar. It follows a decision to devalue the yuan by 1.9% against the dollar overnight, a move Beijing described as a "one-off depreciation" at the time.

Jasper Lawler, analyst at CMC Markets UK, said the last few sessions had hinted at safe haven demand returning to benefit the precious metals market, especially in light of the yuan devaluation.

“Gold and silver broke out to a three week high on Wednesday as the dollar fell and investors moved to the safe-haven of precious metals and away from unstable fiat currencies that are open to government devaluation,” Lawler noted.

However, the devaluation hammered selected base metals, which would cost more in international markets for Chinese importers. Past 1628 BST, three-month delivery contracts of nickel (down 0.2%) and tin (down 1.0%) were trading lower on the London Metal Exchange.

Given Tuesday’s heavy sell-off, not all contracts registered losses, as primary aluminium (up 0.5%), copper (up 0.9%), lead (0.4%) and zinc (up 0.9%) stayed in recovery mode.

Oil benchmarks also saw an uptick on a weaker dollar. The Brent front month futures contract was up 0.14% or seven cents to $49.25 a barrel, while the WTI was up two cents or 0.05% to $43.10.

Finally, corn futures plunged after the US Department of Agriculture raised its projections for the country’s harvest, issuing a surprisingly upbeat forecast. In its first survey-based estimate for the 2015-16 crop, the USDA noted the corn harvest will total 13.686bn bushels, compared with 13.53bn projected in July and well above the consensus forecast of 13.334bn.

The data release sent CBOT corn futures lower in Chicago by as much as 7.8% at one point; the highest intraday drop on record since May 2013. At the time of writing, the December contract was 4.52% or $17.50 lower at $370 per bushel.

Negativity also spread to the wider market with CBOT wheat (down 1.58%), ICE cotton (down 1.82%) and CME live cattle (down 0.12%).