Crude oil reversed gains after failing to test 84 in NY session Monday. The February contract ended the day at 82.52, down -0.3%. Currently trading at 81.9, the decline accelerates as the central bank of China rolled out more tightening and weather forecasts suggested temperature will turn warmer later this week.
The People’s Bank of China (PBOC) sold 1-year bills at a yield of 1.8434% in open market operations. The yield has been staying at 1.7605% since August 2009. This may be a sign that China is trying to tighten the market more aggressively than expected. Last Thursday, PBOC offered RMB 60B worth of 3-month bills at 1.3684% in its weekly open-market operation, +4 bps higher than the rate kept since August. The move indicates that China would continue to guide market interest rates higher and absorb liquidity from the market through issuance of central bank notes.
Weather forecasts said that temperature will return to normal in eastern cities such as New York and Boston later this week. This news dampened bullishness as recent rally in energy price was driven by extremely cold weather in the Northern hemisphere. Traders believed the adverse weather condition should boost demand for energy.
Gold price settled at 1151.4, up +1%, after surging to as high as 1163 yesterday. A weak dollar may help push the yellow metal higher this week. Platinum extends its rally to 1602.5 in Asian session today. The benchmark outperformed others as the launch of the first US ETF spurred investment demand.
Last Friday, ETF Securities’ first US platinum and palladium ETFs started trading with strong volume. Initial allocation of the platinum and palladium ETFs were 9,969 oz and 9,996 oz, respectively, volume traded on the first day (reflecting both primary and secondary trade) reached 414,742 shares for platinum and 294,943 shares for palladium. Platinum holdings in the non-US ETFs also rose modestly by +158 oz to hit a fresh high, while palladium holdings fell by -5.5k oz to 1.155M oz.
Source: Oil N Gold