As Wall Street was closed for Thanksgiving Day holiday, the focus was once again on the Eurozone. More bad news was received and financial market sank further. Germany’s Chancellor Angela Merkel reiterated her disfavor on Eurobonds while Fitch’s downgraded Portugal’s credit rating to non-investment grade. In the commodity sector, Brent crude rebounded and closed at 107.78. Near-term risk is skewed to the downside, though.
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More Bad News from Europe…
The price of an ounce of gold is back at $1700 this week, following oil prices and stock markets lower as ongoing concerns over Europe’s debt crisis combined with news that the super committee in the US has failed to reach an agreement to cut $1.2 trillion in spending.
Latest Gold Price
Gold for December delivery plummeted $50.60 to close at $1,678.60 an ounce at the Comex division of the NYMEX. The gold price has traded as high as $1,727.40 and as low as $1,670.50 an ounce while the spot price was sinking $42, according to Kitco’s gold index.
Last week, the spot price of gold fell 3.7 percent to $1,723.90 per ounce and posted its first weekly loss since 21st October.
Sell Off on the Markets
The majority of last week’s gold price sell off occurred last Wednesday and Thursday, which marked the yellow metal’s worst two day stretch since early September. The move lower was accompanied by broad based weakness in commodities, oil prices and global stock markets.
Gold plummeted past the key support level of $1,680 with options expiring on Tuesday, which can trigger a lot of rebalancing and more volatility.
“It looks like the $1,680 area is the biggest open interest. I don’t think that there is any time where you can say it won’t be volatile … you need a seat belt to trade this stuff.” said Stephen Eubanks, director of institutional sales trading at Mr TopStep.
Further complicating matters for gold is that the US super committee, charged with slashing $1.2 trillion from the deficit over the next 10 years, most likely has failed.
This, combined with the ongoing debt crisis in Europe could well see gold prices fall further in the short term, as the US dollar makes gains off the back of a weaker euro, which tends to cap commodity gains as gold is priced in dollars.
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Price of gold back at $1700 an ounce, follows oil and markets lower
Brent oil prices open today’s trading session at $107 a barrel as Iran comes back into the spotlight after the UK, the US and Canada announced new sanctions against Iran overnight, with the US for the first time targeting the country’s oil industry.
Latest Brent Oil Price
In London, Brent crude oil futures for January 2012 delivery was trading at $107.25 a barrel, 07.43 GMT this morning on the ICE Futures Exchange.
The European oil contract closed yesterday’s trading session 0.5 percent lower at $107.02 as stock markets around the world once again slumped.
Iran Targeted With More Sanctions
Yesterday, the UK, US and Canada announced that they were levelling additional sanctions on Iran’s financial sector because of a report by the UN atomic energy watchdog strongly suggesting Tehran was researching nuclear weapons.
With UN sanctions blocked by Chinese and Russian opposition, the new United States, British and Canadian measures target Iran’s central bank and the vital energy sector.
Notably, the measures seek to limit the West’s links with Iran’s Central Bank, which has been key in funneling proceeds of energy sales to Iran’s government.
France went one step further, calling on international partners to impose a freeze of Iran’s central banks assets and an oil embargo, but did not announce sanctions on Monday.
With speculation about a possible Israeli military strike against Iran reaching fever pitch, Paris also warned of the added risk of a military escalation in the region.
“The consequences of which will be catastrophic for Iran and for the world.”
There was a muted market reaction to the news.
Oil prices in London and New York were pushed lower by fears about debt levels in the US and Europe.
Some experts have cautioned that targeting the Iranian Central Bank could have a profound impact on Iran’s economy and push up crude oil prices at a time when most Western economies are already struggling.
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Brent oil price holds near $107, Iran back in spotlight as new sanctions passed
US WTI oil futures open Tuesday’s trading session around $97 a barrel as oil prices fell lower on Monday off the back of a stronger US dollar, which rose on continued gloom surrounding Euro debts whilst global stock markets slid lower still.
Latest WTI Oil Price
US Light crude oil futures for January 2011 delivery was trading at $97.36 a barrel, 07.20 GMT this morning in electronic trading on the NYMEX.
The US oil contract settled down 75 cents, or 0.8 percent, to $96.92 a barrel at close on Monday.
US Dollar Strength
The ICE Dollar Index, which tracks the US dollar against six major world currencies, was recently up to 78.410, gaining against the euro as worries persisted over Europe’s debt crisis.
A stronger dollar typically weighs on oil prices by making the dollar denominated commodities more expensive for buyers using other currencies.
“There’s a big repatriation into the US dollar. The big elephant in the room continues to be Europe.” said Phil Flynn, energy analyst at brokerage PFG Best in Chicago.
Stock markets around the world fell sharply on Monday, as a warning on France by credit rating agency Moody’s added to investors worries about the euro zone debt crisis.
“This crisis is hitting the core of the euro zone. We should have no illusions about this.” Olli Rehn, the European commissioner for economic and monetary affairs, said Monday.
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WTI oil trading at $97, US dollar strengthens on Euro debt situation
The exchange rate of the US dollar is set to make further gains on the back of the recent European debt turmoil in a forecast according to UBS, sighting recession concerns and potential cuts in interest rates within the euro zone.
US Dollar Forecast – UBS
Latest forecast for the euro is that the European currency is predicted to fall to $1.35 versus the US dollar in one month, $1.30 in three months and $1.25 in 12 months on concern that it may be too late for EU leaders to turn the region’s sovereign debt crisis around, Syed Mansoor Mohi-uddin, a foreign exchange strategist in Singapore, said in a note to clients earlier this week.
UBS forecast the US economy will expand faster than any other developed rival next year, offering a shelter from the eurozone debt crisis. According to the UBS report, US GDP will expand by 2.3 percent in 2012.
“While we believe that the only true safe haven remains the US dollar, times of risk aversion have left investors seeking liquidity and the gilt market has provided that shelter.” UBS said.
The US Dollar was also in the news with consistently high levels of safe haven buying of US assets making the dollar strengthen against most other major currencies.
UBS said the dollar will be the big winner in 2012 as Europe slides back into recession in the first half of next year, forcing the ECB to cut interest rates.
That fear factor certainly hasn’t abated so, barring unforeseen positive news from the Eurozone, we are likely to see further US Dollar strength as the year comes to a close.
The US Dollar surged against all currencies except the Yen, boosted by a financial market flight to safety as the US S&P 500 posted its worst weekly loss in two months.
Continued turmoil in Europe was the scapegoat, and the lack of confidence in European sovereign debt markets continues to spread throughout the global financial world.
Continued deterioration in market confidence favours further US Dollar gains against the Euro and other key counterparts.
Latest US Dollar Index Rate
As of close on Friday, the ICE US Dollar Index, which tracks the US dollar against six major world currencies finished the week’s session at 78.215. The US Dollar Index broke through 80 earlier this month for the first time since January this year.
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US Dollar exchange rate forecast to make gains off European debt turmoil
Financial markets tumbled as sovereign debt crisis worsened and the focus was turned to Spain. The disappointing Spanish bond auction sent yield higher and revealed the weak confidence towards the country. Wall Street slumped with the DJIA and S&P 500 losing -1.13% and -1.68% respectively. Commodities plummeted with the front-month contracts for WTI and Brent crude declining -3.67% and -3.27% respectively. Gold slid -3.06% during the day.
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Financial Markets Slump as Debt Crisis Spreads to Spain
Brent oil futures open today’s trading session hanging near $112 a barrel as speculation Europe will struggle to contain its debt crisis is once again having a negative effect on global stock markets.
Latest Brent Oil Price
In London, Brent crude oil futures for January 2012 delivery was trading at $111.86 a barrel, 07.55 GMT this morning on the ICE Futures Exchange. The December 2011 Brent contract expired yesterday.
Diving Stock Markets
Asian equity markets were trading mostly in the red on Wednesday, notwithstanding a positive session for the US markets overnight as Italian and Spanish borrowing costs continued to climb, keeping investors on tenterhooks.
The MSCI Asia Pacific Index dropped 0.5% at 117.08 as of 10:07 a.m. in Tokyo after swinging between gains and losses at least eight times.
Market sentiment remains negative after the debt crisis worsened yesterday in most Eurozone countries, showing that the unity governments formed in Italy and Greece have not been able to calm investors.
Meanwhile, with Italy’s benchmark sovereign yield above the key 7 percent level, concerns about European defaults have only increased. The yield on Italy’s 10 year government bond flirted with the 7 percent mark again, while Spain’s 10 year yield rose to around 6.26 percent.
Spain faces a weekend general election, which polls show the ruling Socialist party is expected to lose.
“Oil prices have been suffering from renewed recession fears in the Eurozone. Fears over the ongoing debt crisis are still dominating headlines. said Andrey Kryuchenkov, a London based analyst at VTB Group who predicts Brent oil prices will end the year close to current levels.
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Brent oil price hangs near $112 as stock markets again turn negative
Brent crude oil prices open today’s trading session back at $112 a barrel as stock markets dipped lower on debt concerns surrounding Italy which many believe could cause the breakup of the EU itself.
Latest Brent Oil Price
In London, Brent crude oil futures for December 2011 delivery was trading at $112.05 a barrel, 07.00 GMT this morning on the ICE Futures Exchange. The contract ended Wednesday’s trading session down 2.5 percent at $112.15.
European Debt Concerns
Investors drove Italian bond rates well above 7 percent yesterday and stock markets tumbled worldwide, and although critics have warned of just such an escalation for months, European leaders again were caught without a convincing response.
City analysts believe the renewed turmoil in Europe is pointing to a deep recession which would also hit the price of crude oil as demand contracts. “It’s unavoidable that there will be an outright contraction in the fourth quarter of this year.” said Nick Parsons, head of strategy at National Australia Bank.
“We’re at the point of asking the question, if I put my money into Italy, am I going to get it back? The fact is, there isn’t a safety net.” said Simon Derrick, currency strategist at BNY Mellon.
In the immediate term, yields above 7 percent do not present a threat to Italy. The problem arises when Italy wishes to raise new debt and Italy’s next bond auction is not scheduled to take place until next week.
This auction may still go ahead but if Italy is forced to borrow at these rates for any sustained period it will then have to turn to an official bailout.
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Brent oil price back at $112 as markets dip on Italian debt concerns
Worries over contagion of Eurozone’s sovereign debt crisis have materialized and the focus is now on Italy. While Prime Minister Berlusconi agreed to step down, he called for elections instead of formation of an interim government. This might further delay implementation of structural and fiscal reforms. The country’s 10-year bond yields surged above 7%, making it impossible to fund its debts by tapping money from the public. Political turmoil in Greece was the same complicated. News said that talks of selecting a new Prime Minister collapsed.
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Risk Off as Concerns Shifted to Italy
Brent crude oil prices open today’s trading session firm over $115 a barrel as the European oil contract registers it’s fifth straight day of trading gains off the back of oil supply and demand data and growing tensions that surround Iran’s nuclear program.
Latest Brent Oil Price
In London, Brent crude oil futures for December 2011 delivery was trading at $115.51 a barrel, 07.40 GMT this morning on the ICE Futures Exchange.
Oil Supply & Demand
Oil traders are closely watching the latest US crude inventory figures out of America with the US API (American Petroleum Institute) reporting late on Tuesday that US crude oil inventories rose just 148,000 barrels last week while analysts had predicted an increase of 1 million barrels.
Tensions Over Iran Resurface
The United States and Israel have once again voiced grave concerns on Iran’s nuclear program and suggested more sanctions, or even military action, against Tehran following a report released yesterday accusing Iran of conducting activities aimed at developing nuclear weapons.
The report says Iran has obtained enough sensitive material and expertise that it could build a nuclear weapon relatively quickly if it wanted to. The new evidence reinforces Western suspicions that Tehran’s nuclear ambitions are not peaceful as it has long claimed.
A 13 page attachment to the IAEA’s report details intelligence and IAEA research that shows Tehran working on all aspects of research toward making a nuclear weapon, including fitting a warhead onto a missile.
Iran’s nuclear plans may threaten Middle East stability and could potentially disrupt the flow of oil out of the region.
“This current supply shock potential that the markets are looking at with Iran has pushed the price well above our outlook.” said David Lennox, a resource analyst at Fat Prophets, Sydney.
“Disruptions to Iranian supply would drive oil prices significantly higher.” Morgan Stanley said in a report.
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Brent oil price holding firm over $115, fifth straight day of trading gains