Metals In The Morning – Chinese Data & Fed Speakers In View

           Precious metals spent last week on a roller coaster ride all on hopes and dreams of Fed tapering. Those dreams were dashed on Wednesday after Mr. Bernanke and team, held rates and policy in place for the time being. Gold is down at 1320.80 falling close to $12 in the Asian session to start the week. Silver fell harder to trade at 21.473 giving up 2% this morning. Platinum and palladium diverged with platinum trading at 1429.60 slightly in the red and palladium gaining 30 cents to trade at 717.10. Copper is the surprise this morning as industrial metals do not seem to be responding to positive data from China. Copper is down 33 points after the data release to trade at 3.272.

Precious metals slumped as comments from a slate of Federal Reserve officials cause traders to reassess their expectations for the duration of the central bank’s bond-buying program. Gold had surged by nearly five per cent during the previous session, the largest rally in percentage terms since March 2009.

Bearish gold traders scrambled to close out their bets on lower prices following the Fed’s decision late Wednesday to leave its $US85 billion-a-month bond-buying program unchanged.

James Bullard, president of the Federal Reserve Bank of St Louis, said on Bloomberg TV on Friday that “a small taper is possible in October”. Bullard also said the Fed’s move this week to hold to the pace of bond purchases was a “close decision”.  Also on Friday, Kansas City Fed President Esther George said she was worried that the Fed’s ongoing efforts to stimulate the economy fail to account for economic progress already made. George was the lone dissenting vote at the Fed’s policy meeting on Wednesday.

Indian gold imports could fall during this year, which may also curb down the rally of gold prices. According to one report, India’s gold imports may fall by 11% (y-o-y). Conversely, the Rupee gained more than 8.9% of its value in the recent month. If the Rupee continues its upward trend, this could pull up gold and silver prices. In China, the ongoing recovery of the economy along with the strong demand for gold and silver are likely to keep the prices of gold and silver from further falling.  China’s economy showed new signs of strength in September as an initial gauge of manufacturing activity rose to a-six month high The preliminary HSBC China Manufacturing Purchasing Managers Index rose to 51.2 in September compared with a final reading of 50.1 in August, HSBC Holdings PLC said on Monday.

Lastly gold holdings of SPDR gold trust ETF slipped again for the third consecutive week.  During the month, the ETF’s gold holdings fell by 1.18%. The ETF was also down by 32.62% since the beginning of 2013 (up-to-date). Current gold holdings are at 910.19 tons. If the ETF’s gold holdings keep falling, this will signal that the demand for gold as an investment is weakening.

Industrial metals prices edged lower after hitting their highest in almost a month as investors, following the U.S. Federal Reserve’s decision to stick to its stimulus program, shifted focus back to fragile fundamentals but declines were limited by Chinese data this showing that manufacturing rose to a six-month high in Sep, signaling that a rebound in the Chine’s economy is gaining steam. The preliminary reading of 51.2 for PMI by HSBC Holdings Plc and Markit Economics compared with a 50.9 by Bloomberg. The gauge was at 50.1 in Aug. - fxempire.com

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Natural gas futures - Weekly review: September 16 - 20

                     Natural gas futures ended Friday’s session at a four-day low, as forecasts showing mild temperatures across much of the U.S. through late-September weighed.

On the New York Mercantile Exchange, natural gas futures for delivery in October fell 0.9% on Friday to settle the week at USD3.687 per million British thermal units. 

Prices declined by as much as 1.7% earlier in the day to hit a session low of USD3.656, the weakest since September 16. 

Nymex gas prices settled 0.2% higher on Thursday at USD3.720 per million British thermal units, as a round of profit taking kicked in after prices rallied to a two-month high of USD3.820.

Despite Friday’s losses, natural gas prices advanced 0.3% on the week.

Market players continued to monitor near-term weather forecasts to gauge the strength of demand for the fuel.

Updated weather forecasting models pointed to mostly normal to below-normal temperatures across most parts of the U.S. Northeast Midwest for the next ten days.

Bearish speculators are betting on the mild weather to reduce demand for the fuel with autumn’s low-demand shoulder season looming.

The shoulder season is the period in autumn when gas demand typically slackens and prices fall.

Prices rallied to the highest level since July 19 on Thursday after the U.S. Energy Information Administration said natural gas storage in the U.S. rose by 46 billion cubic feet last week, below market expectations for an increase of 56 billion cubic feet.

Inventories increased by 61 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a build of 74 billion cubic feet.

Total U.S. natural gas storage stood at 3.299 trillion cubic feet as of last week, 0.5% above the five-year average for the same week and 5.4% below last year's unusually high level.

Early injection estimates for this week’s storage data range from 70 billion cubic feet to 80 billion cubic feet, compared to a 79 billion cubic feet increase during the same week a year earlier.

The five-year average for the week is a build of 75 billion cubic feet.

Elsewhere in the energy complex, light sweet crude oil futures for November delivery settled at USD104.75 a barrel by close of trade on Friday, losing 2.6% on the week. 

Meanwhile, heating oil for October delivery fell 3.49% on the week to settle at USD3.006 per gallon by close of trade Friday. investing.com

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Crude oil futures - Weekly review: September 16 - 20

                       New York-traded crude oil futures fell to a one-month low on Friday, amid lingering uncertainty over the future of the Federal Reserve's stimulus program and as fears a disruption to supplies from the Middle East continued to fade away.

On the New York Mercantile Exchange, light sweet crude futures for delivery in November declined 1.05% on Friday to settle the week at USD104.75 a barrel by close of trade. 

Prices fell by as much as 1.3% earlier in the day to hit a session low of USD104.51 a barrel, the weakest level since August 23. The November contract settled 1.3% lower at USD105.86 a barrel on Thursday.

Oil futures were likely to find support at USD103.56 a barrel, the low from August 22 and resistance at USD108.14 a barrel, the high from September 19.

On the week, Nymex oil futures lost 2.6%, the biggest weekly decline since the week ended July 26.

Oil prices rallied more than 2% on Wednesday after the Fed decided to leave its USD85 billion-a-month asset purchase program unchanged.

The decision surprised markets, which had been expecting the central bank to taper its monthly stimulus program by USD10 billion to USD15 billion.

In a press conference following the Fed statement, Chairman Ben Bernanke reiterated that the plan to taper asset purchases was never a "preset course," and added that the bank's decision was dependent on how the economic recovery continues to progress.

The central bank also repeated its ongoing goal to keep low interest rates in place until the unemployment rate falls to around 6.5%, as long as inflation doesn't accelerate beyond 2.5% a year.

However, traders reassessed their expectations regarding the duration of the central bank’s bond-buying program on Friday after St. Louis Fed President James Bullard said the decision not to taper in September was “close” and did not rule out a small reduction in the central bank's bond purchases in October. 

The Fed will hold its next monetary policy meeting on Oct. 29-30.

The Federal Reserve’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

The dollar strengthened against the euro and the yen following Bullard’s comments, further weighing on oil prices.

A stronger dollar makes U.S. commodities more expensive for importers holding other currencies.

Meanwhile, receding fears over Middle East supply disruptions continued to weigh.

Oil prices surged to a 27-month high of USD112.22 a barrel on August 28 amid indications the U.S. was close to taking military action against Syria for its alleged use of chemical weapons against civilians. 

But prices have since lost nearly 6% after the U.S. and Russia reached a diplomatic solution on how to handle Syria’s chemical weapons last week.

While Syria is not a major oil producer, investors fear that the two-year-old civil war could spill over to affect oil supplies in nearby countries.

Reports that Libyan oil production is on the rise after protesters reopened access to facilities also added to the selling pressure, as did talk that oil output in Iraq is recovering.

Countries in the Middle East were responsible for nearly 35% of global oil production in 2012.

Elsewhere, on the ICE Futures Exchange in London, Brent oil futures for November delivery inched up 0.4% on Friday to settle the week at USD109.22 a barrel.

Despite Friday’s modest gain, the London-traded Brent contract still lost 2.25% over the week, while the spread between the Brent and the crude contracts stood at USD4.47 a barrel by close of trade on Friday.

In the week ahead, uncertainty over the direction of the Fed’s monetary policy and the decision over Chairman Ben Bernanke’s eventual successor look likely to influence commodity prices. 

Oil traders will be closely watching a preliminary reading of China’s HSBC manufacturing index on Monday, to gauge the economic strength of the world’s second largest oil consumer.   - investing.com

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Gold / Silver / Copper futures - Weekly review: September 16 - 20

             Gold futures plunged nearly 3% on Friday, amid ongoing uncertainty over the future of the Federal Reserve's stimulus program.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery tumbled 2.7% on Friday to settle the week at USD1,332.50 a troy ounce. 

Gold futures fell by as much as 3.2% earlier in the session to hit a daily low of USD1,325.10 a troy ounce. The December contract settled 4.7% higher at USD1,369.30 a troy ounce on Thursday.

Gold futures were likely to find support at USD1,291.70 a troy ounce, the low from September 18 and resistance at USD1,375.10, the high from September 19.

Despite Friday’s sharp decline, gold prices still ended the week with a 0.5% gain, due to Thursday’s sharp rally. 

Gold prices soared by as much as 4.5% on Thursday after the Fed decided to leave its USD85 billion-a-month stimulus program unchanged.

The decision surprised markets, which had been expecting the central bank to taper its monthly stimulus program by USD10 billion to USD15 billion.

In a press conference following the Fed statement, Chairman Ben Bernanke reiterated that the plan to taper asset purchases was never a "preset course," and added that the bank's decision was dependent on how the economic recovery continues to progress.

The central bank also repeated its ongoing goal to keep low interest rates in place until the unemployment rate falls to around 6.5%, as long as inflation doesn't accelerate beyond 2.5% a year.

But the precious metal came under heavy selling pressure on Friday after St. Louis Fed President James Bullard said the decision not to taper in September was “close” and did not rule out a small reduction in the central bank's bond purchases in October. 

The Fed will hold its next monetary policy meeting on Oct. 29-30.

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its quantitative easing program sooner-than-expected.

The dollar strengthened against the euro and the yen following Bullard’s comments, further weighing on gold prices.

Gold prices often move inversely to the U.S. dollar, as gold becomes more expensive for buyers using other currencies.

In the week ahead, uncertainty over the direction of the Fed’s monetary policy and the decision over Chairman Ben Bernanke’s eventual successor look likely to influence gold prices. 

The precious metal is on track to post a loss of nearly 22% on the year as traders bet an improving U.S. economy would lead the Fed to unwind its stimulus program by the year's end.

Elsewhere on the Comex, silver for December delivery plummeted 5.85% on Friday to settle the week at USD21.92 a troy ounce. Silver prices settled 8% higher at USD23.29 on Thursday.

On the week, silver future prices declined 1.45%.

Meanwhile, copper for December delivery dropped 0.8% on Friday to close the week at USD3.320 a pound. On Thursday, copper futures rallied 2.1% to settle at USD3.347 a pound.

Prices of the red metal advanced 3% on the week.

Copper traders will be closely watching a preliminary reading of China’s HSBC manufacturing index on Monday, to gauge the economic strength of the world’s largest copper consumer.   - investing.com

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