Author: adrianwolsters

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Could We See $2,000 Gold? Sibanye-Stillwater CEO Weighs In (video)

The greenback firmed although headline GDP growth came in less than expected. The inflation outlook, however, appeared to have improved with the core PCE deflator rising +1.8% saar, the largest increase in 3 years. Wall Street was mixed with DJIA slipping -0.03% and S&P 500 closing flat for the day. In the commodity sector, crude oil fell with the front-month WTI contract losing -0.55% and the Brent contract down -0.13%.

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Better Inflation Outlook Lifted USD

With the US closed on Memorial Day holiday, the focus was on ECB President Mario Draghi’s speech and the European Parliament election. Draghi indicated credit constraints and risk of disinflationary expectations in the bloc, and outlined possible ECB policy action. Investors also appeared to be settled for now after the presidential election in Ukraine with Ukraine’s benchmark equities index rising almost +5%.

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Draghi Discussed More about ECB’s Policy Actions

The price of an ounce of silver shot 0.4 percent higher today to $20.27 as a weaker US dollar together with weak economic data out of the US supported precious metals prices, with gold hitting $1300 an ounce for the first time since November last year.

Silver prices climbed higher to another session win after economic news from the US came in below expectations, signalling ultra loose monetary policy could be around for longer than expected. The poor economic data comes on the heels of two disappointing jobs reports in December and January which have strengthened the hands of supporters of the Fed’s economic stimulus program.

Safe Haven Investing

In times of turmoil as emerging market worries replace fears over the euro zone which occupied investors minds in 2012 and 2013, silver and gold prices are rising again as safe haven buying comes back into fashion for some investors.

Strong physical demand from Asia has also underpinned the strength of silver and gold this year with speculation that a purported 500 tonnes of gold bought by the Chinese central bank will be added to this year.

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Silver price heads towards a one month high, gold follows suit

Market sentiment remained cautious ahead of European session. While negotiations of the US debt ceiling lacked progress, the IMF revised lower its global economic forecasts. In Asia, the BOJ minutes unveiled that policymakers were seeing a moderate recovery domestically. They also pledged to maintain QE measures as long as necessary.

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IMF Downgraded Global Economic Outlook

The strength in Wall Street on Tuesday signaled that the market had anticipated the temporary shutdown of the US government and cost of which would be limited. Also supported the market was probably the news headline stating that Senate Majority Leader Harry Reid and the Democrats signaled the willingness to negotiate a “clean” bill to fund the government for a few months before negotiating over parts of the health care law.

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Stocks Gained as US Policymakers Might Discuss Revised Funding Plans

US WTI crude oil is trading firm over $101 a barrel early this morning following the US EIA’s weekly oil inventory report out on Wednesday that showed a massive 10.3 million barrel decline in US oil stocks, whilst oil prices continue to bounce off tensions in Egypt.

Latest WTI Oil Price

US Light sweet crude oil futures for August 2013 delivery was trading at $101.14 a barrel, 08:04 GMT in electronic trading on the NYMEX. Elsewhere, on the ICE Futures Exchange, Brent oil futures for August 2013 delivery was at $105.58 a barrel, with the spread between the Brent and WTI contracts standing at just $4.44 a barrel, the narrowest level since 2010.

US Oil Inventories – Report

The US EIA (Energy Information Administration) said in its weekly report on Wednesday that US crude oil inventories fell by 10.3 million barrels in the week ended June 28, compared to expectations for a decline of only 2.3 million barrels, the most this year, government data showed.

“Oil demand will grow gradually in the second half thanks to some rebound in economies, especially in the US. But there is no shortage of oil, therefore upside will be limited.” according to Ken Hasegawa, an energy trading manager at Newedge Group, Tokyo.

However, American crude oil inventories are still above the upper limit of the average range for this time of year, say the EIA.

WTI surged above $100 a barrel this week for the first time since September 2012, helped along by the political showdown in Egypt that has heightened concern of unrest in the most populous Arab country will spread and disrupt regional oil supplies through the Suez Canal.

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WTI crude oil over $101 as US inventories in massive weekly decline

Gold price met renewed selling in European session with the Comex gold contract breaching 1300 for the first time since 2010. Fed’s indications of less downside risks in the economic environment and completion of QE tapering by mid 2014 have lifted the greenback. Meanwhile, benign inflation has reduced the appetite for gold purchases to hedge against inflation.

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Fed’s Stance Added Further Pressure to Gold Price

Financial markets slumped on weak economic data, concerns over the long-term impacts of ECB’s stimulus and BOJ’s inaction. Wall Street plunged with the DJIA and the S&P 500 indices decreasing -0.76% and -1.02% respectively. In the commodity sector, the front-month contract for WTI crude oil dropped -0.41% to 95.38 at close while the Brent crude contract initially fell to a 5-day low of 101.82 before settling at 102.96, down -0.95%.

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Sentiment Slumped on Disappointing US Data, Concerns over ECB’s OMT Impacts

Wall Street rallied yesterday despite disappointing ISM data. As recent focus of the US market has been whether the Fed would taper QE measures by the year-end, worse-than-expected US economic helped downplaying these speculations. Wall Street gained with the DJIA and the S&P 500 indices adding +0.92% and +0.59% respectively.

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Risky Assets Gained on Disappointing Economic Data