Gold Tumbles as China is Uninterested in IMF’s Sales
Crude oil price continues sliding in European morning with the front-month contract extending weakness to 78.3, after a -1.8% Tuesday. Investors remain worried about the unexpected decline in US consumer confidence.
After of Bernanke’s Testimony, the data in focus is Eurozone’s industrial new orders which rose +0.8% m/m in December, compared with a contraction of -1% as forecast by the market. On annual basis, the reading expanded +9.5% following a -0.6% decline in November. In Germany, Gfk consumer confidence slid to 3.2 (consensus: 3) in March from an upwardly revised 3.3 in February.
The slightly stronger-than-expected data help recouping some of the losses the European stock markets incurred earlier in the day. Given the strong direct correlation between stock market and oil, we expect this should give some support to oil price.
The euro also recovers modestly against USD, although it stays at a 9-month low. The rebound is probably due to market expectation that Fed Chairman Ben Bernanke will reiterate the central bank’s accommodative monetary stance in the congressional testimony. Bernanke will likely restate that the Fed will keep the policy rate at 0-0.25% for an ‘extended period’.
A newspaper in China reported that an official from the China Gold Association said the county is unlikely to buy gold from IMF. ‘It’s not feasible for China buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility’. Rather, the official stated China will increase gold reserves by acquiring gold mines abroad.
The news is disappointing as the market had hoped some central banks or official sectors will absorb IMF’s remaining gold sales of 191.3 metric tons.
Gold price plunges with the benchmark contract breaking below near-term support at 1100. Currently trading at 1190.5, the yellow metal has fallen for a 3th consecutive day.
Source: Oil n Gold Report
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