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World commodities

January 13, 2013

Gold: In the London market, gold prices topped $1675 an ounce on January 10, rising along with the euro after the European Central Bank gave no hints on near term rate cuts. The bank opted to leave benchmark rates unchanged.

Central bank monetary stimulus was a key driver behind gold’s 12th year of annual gains in 2012 as investors were drawn to bullion as a hedge against inflation.

In the London market, gold was down marginally on January 9, losing early gains as a stronger dollar weighed against background support from firmer equities markets.

The broader focus stayed on US budget talks as President Barack Obama and congressional Republicans face further battles in the next two months after brokering a deal in late December to avert devastating tax increases and spending cuts known as the ‘fiscal cliff’.

Expectations for seasonally strong physical demand for the metal in Asian markets were also seen as supportive.

Spot gold edged down to $1,657.35 an ounce while US gold futures for December delivery were down 0.1 per cent at $1,659.60.

Gold’s rally was capped by strong resistance in the $1,660-$1,665 region from its 200-day moving average and the 50 per cent retracement of its move from last year’s low in May to its October high.

On the physical markets, gold buying tailed off in major consumer India after a strong start last week.

Holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, eased for a second day and are down 11 tonnes from the start of the year.

In the Singapore market, gold was little changed on January 10, with investors eying a key resistance level just above $1,660 an ounce and awaiting a rate decision by the European Central Bank.

Gold moved in a narrow range of about $25 last week, with the upside capped by signs that the United States might end its easy money policy. Physical buying in Asia has helped support prices above $1,640 an ounce.

It dropped to a more than four-month low below $1,630 an ounce a fortnight back after minutes from the US Federal Reserve’s last meeting showed officials were concerned about the side effects of its bond buying programme.


On January 9, oil rose in New York for the first time in three days after China’s exports increased more than forecast in December, signalling growth in the world’s second-largest crude consumer.

West Texas Intermediate futures gained as much as 0.5 per cent after China’s customs administration reported exports jumped by 14 per cent in December from a year earlier. Imports climbed six per cent after being unchanged the previous month. US crude stockpiles were up 1.3 million barrels last week, Energy Department data showed. Crude for February delivery advanced as much as 43 cents to $93.53 a barrel in electronic trading on the New York Mercantile Exchange.

Prices lost 7.1 per cent in 2012 after three years of gains. Brent oil for February settlement on the London-based ICE Futures Europe exchange rose as much as 18 cents, or 0.2 per cent, to $111.94 a barrel. The European benchmark crude was at a premium of $18.38 to WTI futures, down from $18.66 on January 9.

A rebound in China’s trade may give policy makers more time to shift the economy toward domestic consumption to sustain expansion. Growth cooled to an estimated 13-year low in 2012 as Europe’s debt crisis crimped demand for Chinese goods.

Meanwhile, US gasoline stockpiles climbed for a seventh week to 233 million barrels, the highest since February 2011. Supplies were projected to rise by 2.5 million barrels. Distillate inventories increased 6.8 million barrels, the most since May 1997, versus a forecast gain of 1.9 million.

Turkey is drilling for oil and natural gas with more rigs than any European country and plans new rules in 2018 to speed exploration of energy supplies for the fastest-growing major economy after China.

Turkey has leapfrogged Norway as offshore drilling increased in the Black and Mediterranean seas. Spending on exploration jumped to $610 million last year from $42 million a decade earlier. Turkey is drilling for its own energy to ease reliance on imports from Iran, Iraq and Russia.

Turkish Petroleum, which is known as TPAO and has operations in Libya, Iraq, Azerbaijan and Kazakhstan, needs to boost domestic output as it pursues a target of supplying all of Turkey’s energy needs by 2023.

Turkey has proved reserves of 307 million barrels of oil and gas in 2010, 88 per cent of which is oil. In 2011 alone, the country consumed about 258 million barrels, according to the EIA.

Turkey imported about 92 per cent of the oil it consumed in 2011 and 98 per cent of the natural gas, according to the US Energy Information Administration. The scale of Turkey’s energy imports is swelling the current account deficit, fueling inflation and threatening to restrain economic growth.

Turkey produced 2.3 million tonnes of oil in 2012. The average production is 44,000 barrels a day with domestic production meeting eight per cent of overall consumption needs, according to official figures. In contrast, Norway produced about two million barrels of oil a day in 2011, according to BP Plc’s Statistical Review of World energy. Russia produced 10 million barrels a day.

While the country has found little oil and gas in its territories, it’s one of the world’s big transport hubs for energy. With an area larger than Texas nestled between Europe and the oil-rich Middle East and countries of the former Soviet Union, Turkey has four major pipelines sending gas to Europe and there are plans for two more. It has four oil pipelines to bring crude from Iraq and the Caspian and got about half of its oil from Iran is 2012 and is compensating for decreased purchases through imports from Saudi Arabia, Libya and Russia amid US sanctions.The US energy department reported that average output rose to 7.002 million barrels a day in the week ended January 4, a 1.16 million-barrel increase from the same week last year. The country met 83 per cent of its energy needs in the first nine months of 2012, on pace to be the highest annual rate since 1991, department data show.

Production grew by the fastest pace in US history last year and will accelerate in 2013 as horizontal drilling and hydraulic fracturing, or fracking, unlocks crude trapped in formations such as North Dakota’s Bakken shale. The state boosted production 40 per cent last year through October, Energy Department data show. Texas was up 23 per cent, and Utah rose 11 per cent. The US will pump an average 7.32 million barrels a day this year and 7.92 million in 2014, the department said.


In the London market copper rose on January 10 due to a weak dollar and strong export figures from the metal’s top consumer China, which boosted prospects for a recovery in demand.

But data showing lower imports of copper to China in December, compared with the previous month, and an uncertain outlook for trade prevented further gains.

Three-month copper on the London Metal Exchange ended at $8,110 a tonne, up from a close of $8,080 on January 9.

Trade data released on January 10 showed the value of China’s exports grew 14.1 per cent last month compared with a year earlier, racing past the forecasts of analysts, who had expected annual growth of four per cent.

Analysts, however, said the pick-up in exports growth from November’s 2.9 per cent rise was probably accentuated by lower comparison figures a year ago and exporters clearing year-end orders, factors that do not suggest a sustainable turnaround. They said concerns about subdued global growth mean that China’s export spike may not signal an enduring recovery.

Also helping metals prices was a drop in the US dollar against basket of currencies, with the euro climbing to a one-week high against the dollar. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.

Copper imports into China, the world’s top consumer of the metal, fell 6.6 per cent in December on the month due to weak demand from plants, which reduced purchases of metal at the end of the year because of low cash flows. It hit a two-and- a-half-month high of $8,256.50 a tonne on January 3, but has since struggled to breach that level.

The metal for delivery in April fell 0.2 per cent 58,640 yuan (9,434) a tonne on the Shanghai Futures Exchange. Futures for March delivery on the Comex in New York fell 0.2 per cent to $3.7010 per pound.

The metal was set for a third weekly advance on optimism that plans by the Japanese government to spend 10.3 trillion yen ($116 billion) to boost the economy will increase demand. Other industrial metals also rose.

Japanese Prime Minister Shinzo Abe’s fiscal spending plan is expected to increase the GDP by about two percentage points and create about 600,000 jobs, according to a statement from the Cabinet office. The MSCI Asia Pacific Index is poised to gain for an eight week, while the Standard & Poor’s 500 Index closed on January 10 above its highest closing level since December 2007.