Posts Tagged ‘oilngold’
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
Crude Rebounds as Strong European PMIs Halt USD’s Rally
Crude oil rebounds to 73.2 in European morning in tandem with the equity market as strong manufacturing PMI readings in European countries boosted sentiment and buying interest in the Euro. The White House’s spending plan which will increase the country’s deficit to $1.6 trillion made investors worry about USD. Moreover, cancellation in ceasefire in Nigeria raised concerns about supply disruption in the region. However, we believe these triggers will only have short-term impact.
Major European countries reported better-than-expected PMI for January. In Switzerland, the SVME-PMI improved to 56 in January (consensus: 55.4) from 53.7 a month ago. In the Eurozone, the PMI is revised up to 52.4 in January from flashing reading of 52. Both the euro and the Swiss franc rebound against USD after tumbling last week. Unfortunately, the pound’s slump continue despite an unexpected improvement in PMI to 56.7. The market had anticipated a retreat to 53.9 from 54.6 in December. Sterling dives to a 1-month low of 1.585 against the dollar as the market forecasts the BOE will announce to pause the asset purchase program even the UK economy remains fragile.
Today, the US will release the budget plan which likely shows the nation’s budget deficit will reach a record of $1.6 trillion in the fiscal year ending September 30 before reducing to $1.3 trillion in fiscal year 2011. In order to stimulus economic growth and create job opportunities, the government will be spending $3.8 trillion.
In 2009, USD was under heavy selling pressure because the country printed money as a means to stimulate growth. Investors even speculated the euro or a basket of currencies would be replacing the dollar as the dominant reserve currency. However, such speculation diminished recently, especially the Greek fiscal problem caused dumping in the euro.
Last week, MEND, the main militant group in Niger River delta declared to end ceasefire and resume attack in the region’s oil facilities as the government failed consider the group’s demand for ‘the control of its resources and land’. The Niger delta has been facing militant attacks since 2006. Between 2006 and 2009, the country’s oil production has been reduced -25%.
Gold price changes little in European morning although USD halts its rally. Within the precious metal complex, gold has probably lost its appeal to platinum and palladium. For gold price to rally strongly, we may need to see more news about central banks buying the yellow metal and rising inflationary pressure.
Platinum and palladium hold above last week’s lows and rebound. While platinum edges +0.7% to 1519, palladium soars +1.2% to 420.
Source: Oil n Gold
Commodities Under Pressure as USD Rebounds and Pace of Recovery May Slow
Crude oil price remains under pressure in European morning on stock markets’ decline and USD’s rebound. As recent price rallies have brought risky assets’ valuations to stretched levels, investors have become extremely vulnerable to bad economic news and trade restrictions between China and the US immediately triggered worries about recovery.
Inline with the Asian market, stocks open lower in Europe with UK’s FTSE 100 Index sliding -0.7% to 4977. Germany’s DAX and France’s CAC 40 also drop -0.9% and -1% to 5575 and 3698 respectively. Economic data released in the region was largely as market anticipations. Industrial production in the Eurozone contracted -0.3% mom in Jul following a -0.2% decline in the previous month. On annual basis, the gauge declined -15.9%, slightly better than consensus of -16.7%. While continued to fall, fall of employment in the 16-nation region moderated to -0.2% qoq in2Q09 compared a -0.8% decline in the prior quarter.
Earlier in Asia, the MSCI Asia Pacific Index plunged -1.8% after making a 1-year high last week. Japan’s Nikkei 225 Stock Average lost -2.3% to settle at 10202. Strength in Japanese yen spurred concerns about the nation’s recovery. In China, the Shanghai Composite Index gained +1.2% to 3027 as led by the +10% rally of Shandong Minhe Animal Husbandry after China announced investigation of US’ chicken imports.
The dollar rebounds against major currencies after last week’s severe selloff. Against the euro, USD recovered to 1.454 from a 9-month low. After surging for several months, euro’s valuation looks stretched and a near-term correction will likely be seen.
Several Fed officials, Duke, Lacker and Yellen, will speak about financial regulations and economic outlook, While we believe main themes will remain largely the same as what the Fed said during the FOMC in September: better economic outlook but recovery will be gradual and uncertain, expansionary monetary policies should remain for some more time. Any change in tones, either more bullish or bearish, will move the currency and hence commodity prices.
Gold price falls below 1000 while silver also plunges -1.6% to 16.4 as USD strengthens. For gold, investment demand has been the crucial price driver as physical demand remains sluggish since the beginning of the year. We will monitor to see if there’re capitals flowing out of the gold ETFs and/or futures after weeks of inflows. Should this be the case, investors should take profits from their long positions first.
