Gold
GOLD fell below $1,400 – a four week low – in the London market, as the dollar gained to a six-week high against the euro, clouding the bullion’s already weak technical picture.
The metal extended losses after the weekly US Energy Information Agency (EIA) crude inventory data sent oil prices lower, denting the bullion’s appeal as a hedge against inflation. Spot gold dropped as much as two per cent to its lowest since April 19, at $1,394.06 an ounce.
Analysts expect that a fall below the psychologically significant $1,400 level could be a trigger for further heavy selling, and the metal might re-test its two-year low of $1,321.35 an ounce that it had hit on April 16 – its worst daily loss in over 30 years.
A fifth consecutive daily fall for bullion would be its longest run of losses since January 2011. US gold futures for June fell 2.1 per cent to $1,394.60 an ounce.
In the Singapore market, gold dropped to its weakest level in almost a month on May 15, hurt by a firmer dollar and as holdings in exchange-traded funds (ETFs) fell to their lowest level in over four years, potentially stretching bullion’s losing streak to a sixth day.
Gold fell as much as 1.6 per cent to a low of $1,369.29 an ounce in earlier trade. It pared some losses, but remained down 1.2 per cent at $1,375.46.US gold for June delivery was down 1.5 per cent at $1,374.30 an ounce, having hit a low of $1,368.
Traders said the fall below the psychologically significant $1,400 level triggered heavy selling.
Gold is less than $60 away from its two-year low. Prices have fallen nearly 18 per cent this year, and are well below its record of around $1,920 struck in September 2011.
The metal had been gaining for the past 12 years before that.
Financial markets are also rife with speculation that the US Federal Reserve may begin winding down its aggressive monetary stimulus, undermining the argument for holding gold as a hedge against potential inflation.
Buying by the world’s top two gold consumers, India and China, helped put a floor below the price. Gold demand in India, the world’s largest consumer, rose by 27 per cent to 256.5 tonnes in the first quarter of 2013, reported the World Gold Council (WGC). The demand for the precious metal stood at 202.1 tonnes in the same quarter last year. In terms of value, WGC said in its latest report that gold demand in India during January-March period of this year increased by 32 per cent to Rs729 billion, against Rs551.5 billion in the year-ago period.
China also bought a large amount of gold, after prices fell by more than $20 overnight. Premiums for gold bars rallied to all-time highs in Hong Kong – China’s main source for gold imports – after bullion’s steepest drop since the April sell-off fuelled another round of buying, say dealers. Gold bars in Hong Kong fetched premiums of up to $5 an ounce.
Meanwhile, gold investment nearly halved in the first quarter, as a brighter view of the US economy prompted Western investors to favour other assets, like stocks, said the WGC. A drop in ETF holdings indicates that investors are shifting to equities from gold. Holdings in SPDR Gold Trust, the world’s largest gold-backed ETF, fell 0.43 per cent to 1047.14 tonnes on May 15, the lowest since March 2009.
Total jewellery demand rose by 15 per cent to 159.5 tonnes in the first quarter of 2013, from 138.3 tonnes in the year-ago period. Investment demand increased by 52 per cent to 97 tonnes from 63.8 tonnes in the review period. A total of 21 tonnes of gold was recycled in the January-March quarter this year, against 25 tonnes in the same quarter of 2012, the report said.
Global gold demand in the first quarter of 2013 fell by 13 per cent to 963 tonnes, as strong growth in consumer demand for gold jewellery, bars and coins was exceeded by substantial net outflows from gold ETFs, said WGC.
Oil
RISE in North America’s oil production will transform global markets over the next five years, the International Energy Administration said in its yearly report. It forecasted that North America, led by the United States and Canada, would see its oil production rise by 3.9 million barrels per day from 2012 to 2018.
This will constitute more than half of the growth in oil production outside the Organisation of Oil Producing Countries (Opec) region, the report stated.
US shale oil will help meet most of the world’s new oil demand in the next five years, even if the global economy picks up steam, leaving the need for Opec crude barely changed from current levels, the energy agency said.
It expects global oil demand to rise eight per cent between 2012 and 2018 to reach 96.7 million barrels per day (bpd), based on a fairly optimistic International Monetary Fund global economic growth assumption of between three and 4.5 per cent year during the period.
This incremental demand will be mainly met by non-Opec production, which will rise by more than 10 per cent between 2012 and 2018 to 59.31 million bpd, the IEA said, increasing its October 2012 estimate of non-Opec supply in 2017 by one million barrels per day. This will leave Opec, which had been long seen as the last resort for the world to meet rising demand, with output fluctuating around current levels of 30 million bpd for the next five years.
The agency cut its estimate of the demand for Opec crude and stocks in 2017 to 29.99 million bpd, down by 1.22 million bpd from its previous report. The US shale oil boom and a technological revolution coming with it could also help Russia and China boost their production from unconventional reserves, while also probably slowing projects in North Africa, as oil firms pull out due to security concerns.
“Several members of the (Opec) producer group face new hurdles, notably in North and sub-Saharan Africa. The regional fallout from the Arab Spring is taking a toll on investment and capacity growth,” the IEA said.
“Downward adjustments across the (Opec) group are partly offset by substantially stronger growth in Saudi capacity than previously expected, reflecting newly announced development projects.”
However, Iran’s sustainable crude production capacity was likely to fall by as much as one million bpd to 2.38 million bpd by 2018, the lowest in many decades, due to Western sanctions, the report predicted.
Meanwhile, West Texas Intermediate crude fell for the fifth time in six days, amid signs of economic weakness in the US and Europe that threaten fuel demand.
Futures slid as much as 0.8 per cent in New York. US industrial production dropped the most in eight months in April, while manufacturing in the New York region unexpectedly shrank in May, and the euro-area economy contracted more than forecasted in the first quarter. A measure of US fuel consumption fell by 584,000 barrels a day last week to 18.5 million bpd, EIA data showed.
WTI for June delivery lost as much as 71 cents to $93.59 a barrel in electronic trading on the New York Mercantile Exchange, and was at $93.60 in Singapore on May 15.
The volume of all contracts traded was 18 per cent above the 100-day average. Prices erased a drop of as much as 2.2 per cent on May 15, to close nine cents higher at $94.30 as investors speculated central banks to act to boost their economies.
US gasoline consumption shrank 1.2 per cent last week to 8.34 million bpd, the lowest level since March 15, according to a report from the EIA. Demand for distillate fuels, including heating oil and diesel, decreased 2.4 per cent. Gasoline stockpiles rose 2.59 million barrels to 217.7 million, the biggest gain since January, the data showed.
Supplies were expected to decrease 1.1 million barrels, according to the median estimate of 12 analysts surveyed by Bloomberg News. Distillate inventories climbed 2.3 million barrels to 119.9 million, more than a 475,000-barrels gain projected in the survey.
Copper
IN the London market, copper rose on May 16, rebounding from earlier falls as the dollar weakened against the euro and a basket of currencies. However, further gains for the metal were capped by concern about lacklustre demand from top consumer China. Three-month copper on the London Metal Exchange closed at $7,280 a tonne, up from $7,198 a day earlier.
Further weakness could lie ahead for the metal used in power and construction, as buying activity among fund managers had abated, and concerns remained about the outlook for demand from China, which accounts for 40 per cent of global copper demand.
Copper logged its steepest fall in two weeks on May 14 – a decline of 2.3 per cent – and was down nearly 10 per cent for the year. Many fund investors regarded a rebound to nearly $7,500 from 18-month lows as an opportunity to add to short positions.