The FOMC May Need To Add Stimulus To Offset Shutdown

      For weeks traders have talked “tapering”. They were almost sure it would have begun last month, now they were expecting big news this month. Others were saying by the end of the year. But everyone was sure tapering would begin soon. That was until the impossible happened. The US government has shut down. Most speculators figured US politicians were playing theatrics and would come up with a last minute agreement as they do all the time but this time they seem to have out maneuvered themselves. Putting themselves in a bind. The noose is now tightening as the budget crisis becomes ensnared with the debt ceiling negotiations.

The Federal Reserve is not funded by the budget and will therefore remain operational, which means that we will continue to hear from Fed speakers. Yesterday, traders were shaken when a Fed member suggested that the FOMC might need to add additional stimulus to help the government recover from the economic damage caused by the shutdown.  Caught in the middle of this confusion are precious metals. Gold and silver have been trading all over the place. Gold is trading at 1312.00 down by $8.70 this morning. Gold climbed over the 1320 level yesterday as traders took advantage of the steep decline on Monday and the weak US dollar to buy up the commodity.

The most actively traded contract, for December delivery, on Wednesday settled up $34.60, or 2.7 per cent, at $1,320.70. The US federal government closure moved into a second day as Democrats and Republicans remained deadlocked over a budget for the fiscal year, which started on October 1. Some investors are now worried that the shutdown will last longer than expected, leading to terser negotiations over the US debt ceiling in mid-October. Gold traded near two-month lows on Wednesday as the first US government shutdown in 17 years kept investors on edge, stoking worries of further liquidation after a sharp 3 percent drop in the previous session. Bullion posted its biggest daily percentage drop in more than two weeks on Tuesday following a massive Comex sell order and technical selling once prices fell below $1,300 an ounce. For the year, gold has shed about 23 percent of its value largely on fears over a US stimulus cutback. Gold’s safe-haven appeal is usually burnished by uncertain economy and geopolitical tensions. Prolonged politicking around the US budget had initially prompted hopes that gold prices could rise, but safe-haven bids failed to emerge.

Taking cues from rise in gold prices along with upside in base metals group, silver prices gained around 2.8 percent yesterday. Further, weakness in the DX acted as a positive factor. Silver is trading at 21.725 down by 172 points this morning. Copper gained 1.3 percent in the last trade due to positive economic outlook from Eurozone, which could lead to increased demand for the red metal. Decline in inventories by 0.3 percent to 531,875 tonnes along with weakness in the DX also supported gains. However, weak market sentiments capped sharp gains in the prices. The metal is trading at 3.311 flat this morning. - Fxempire.com

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Crude Oil dips in Asia following solid U.S. showing

             Crude Oil futures traded lower during Thursday’s Asian session on some profit-taking following a stellar performance during Wednesday’s U.S. session that saw crude soar on news of a potential drop in supply. Energy company TransCanada revealed that it would not be able to finish its work on a part of the Keystone pipeline this October. 

On the New York Mercantile Exchange, light, sweet crude futures for November delivery fell 0.34% to USD103.75 per barrel in Asian trading Thursday. The November contract settle higher by 2.02% at USD104.10 per barrel on Wednesday. 

The southern leg of the Keystone pipeline might not see completion, as TransCanada has announced. This leg was supposed to connect Oklahoma to the refineries along the Gulf Coast, enabling an increase in oil supply. 

The crude oil inventories release showed an increase of 5.5 million barrels for the week ending September 27. This was higher than the consensus of a 2.3 million increase in the number of barrels, reflecting a downturn in consumption. The total number of crude oil inventories in the US was at 363.7 million barrels that week. 

In US economic news, the government shutdown carried on for its second day in a row as President Obama refused to budge until a good budget deal is struck. 

Meanwhile, US jobs figures reported by the ADP came in weaker than expected, reflecting another downturn in hiring for September. The August figure was revised lower from 176,000 to 159,000 while the September reading came in at 166,000, lower than the 177,000 estimate. 

The U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories rose by 5.5 million barrels in the week ended Sept. 27, missing market expectations for an increase of 2.3 million barrels. 

Total U.S. crude oil inventories stood at 363.7 million barrels as of last week. The report also showed that total motor gasoline inventories increased by 3.5 million barrels, defying expectations for a decline of 640,000 barrels. 

Elsewhere, Brent crude oil futures for November delivery fell 0.12% to USD108.95 per barrel on the ICE Futures Exchange. - investing.com

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Gold dips on profit-taking

  

          Gold prices traded lower during Thursday’s Asian session on what appears to be a bout of clear profit-taking after the yellow metal surged Wednesday as the ongoing US government shutdown forced traders to seek safety in the precious metal. 

Weak US economic data also contributed to the commodity’s rallies, as the selloff in the US dollar led to a gold price increase. The two assets are inversely correlated. 

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery fell 050% to USD1,314.10 per ounce in Asian trading Thursday. The December contract settled higher by 2.69% at USD1,320.70 per ounce on Wednesday. 

Gold futures were likely to find support at USD1,272.10 a troy ounce, the low from Aug. 7, and resistance at USD1,375.10, the high from Sept. 19.

On Capitol Hill, Republicans and Democrats are still butting heads and unable to come up with a budget plan, forcing the US government shutdown to extend to its second day. This caused the US dollar to lose its appeal as a safe-haven investment, pushing traders to flee to more stable assets such as gold. 

In US economic news out Thursday, the ADP employment report showed a weaker than expected reading of 166K, lower than the 177K estimate for September. The August figure suffered a downward revision from 176K to 159K, reflecting a downturn in hiring for the past quarter. 

Weak hiring data and the ongoing US government shutdown led traders to speculate that the Federal Reserve will keep stimulus measures in place for the month and possibly until the end of the year. This contributed to the dollar’s decline as lower returns for the currency are expected, boosting the inversely correlated gold in turn. 

Elsewhere, Comex silver for December delivery dropped 0.79% to USD21.725 per ounce while copper for December deliver fell 0.17% to USD3.309 per ounce. - investing.com

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Crude Oil falls as U.S. politics limit risk appetite

                Crude Oil futures traded lower in the early part of Tuesday’s Asian session as traders backed away from riskier assets on fears of U.S. government shutdown. 

On the New York Mercantile Exchange, light, sweet crude futures fell 0.08% to USD102.25 per barrel in Asian trading Tuesday. The November contract settled lower by 0.52% at USD102.33 per barrel on Monday. 

Oil traders appeared to gloss over some decent U.S. data and focused more political haggling in the U.S. that could result in a government closure. 

In U.S. economic news out Monday, the Federal Reserve Bank of Dallas reported earlier that its general business activity index increased to 12.8 in September from 5.0 in August, beating market calls for the index to remain unchanged.

Separately, industry data revealed that Chicago purchasing managers' index hit 55.7 in September from 53.0 in August, beating analysts' calls for a 54.0 reading. Those data points were strong enough to stoke speculation that the Fed could taper its monetary easing program before the end of this year. The U.S. is the world’s largest oil consumer. 

On Capitol Hill, Republicans and Democrats are arguing over provisions in Obamacare, President Barack Obama’s sweeping health care legislation that was passed in 2010. Republicans want Obamacare delayed and some provisions in the law to be stripped altogether, but Senate Democrats have balked at that idea. 

New York-traded oil slipped 4.9% in September, but was still able to muster a third-quarter gain of 6%. If the U.S. government shuts down before the end of the week, it could delay the release of the September jobs report due out Friday. 

Elsewhere, Brent crude futures for November delivery fell 0.10% to USD108.20 per barrel on the ICE Futures Exchange. - investing.com

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Gold rises on modest bargain hunting

             Gold futures rose in the early part of Tuesday’s Asian session as traders did some bargain hunting with the yellow metal after it was pushed lower Monday amid looming political uncertainty in the U.S. and Europe. 

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery rose 0.20% to USD1,329.70 per troy ounce in Asian trading Tuesday. The December contract settled lower by 0.91% at USD1,327.00 per ounce on Monday. 

Gold futures were likely to find support at USD1,306.20 a troy ounce, Tuesday's low, and resistance at USD1,375.10, the high from Sept. 19. 

Despite gold’s appeal as a safe-haven investment, investors have in recent days dumped bullion even as the U.S. government heads towards a shutdown that could threaten the health of global financial markets. On Monday, President Barack Obama said a shutdown is preventable and said House Republicans are purposefully manufacturing the shutdown for political gain. 

Over the weekend, the House approved legislation that stripped Obamacare, the President’s landmark health care reform package, of key provisions. However, the Democrat-controlled Senate has vowed to not accept any budget package that waters down Obamacare. 

Gold was also under pressure following some U.S. data points. In U.S. economic news out Monday, the Federal Reserve Bank of Dallas reported earlier that its general business activity index increased to 12.8 in September from 5.0 in August, beating market calls for the index to remain unchanged.

Separately, industry data revealed that Chicago purchasing managers' index hit 55.7 in September from 53.0 in August, beating analysts' calls for a 54.0 reading. Those data points were strong enough to stoke speculation that the Fed could taper its monetary easing program before the end of this year. 

Elsewhere, Comex silver for December delivery fell 0.11% to USD21.685 per ounce while copper for December delivery rose 0.08% to USD3.319 per ounce. - investing.com

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Base metals close higher

              Base metals on the London Metal Exchange (LME) have closed higher, after a senior Federal Reserve official said the bank may keep pumping money into the US economy beyond October.

At the close of open-outcry trading in the London ring on Friday, LME 3-month copper was 0.7 per cent higher on the day at $US7,295 a metric ton.

Aluminum rose 0.9 per cent to $US1,840 a ton, while nickel closed 1.2 per cent higher at $US13,985 a ton.

In early European trading, the metals were lifted as the US dollar weakened against other currencies including the euro, making dollar-priced assets more appealing to buyers holding the other currencies.

Analysts said book-squaring ahead of the end of the month and end of the quarter was lending support to prices.

Later, Charles Evans, president of the Federal Reserve Bank of Chicago, suggested the central bank could refrain from winding down its support for the economy until 2014.

'We could make a decision in October,' Evans said on the sidelines of a bank conference in Oslo

'We need to see further developments of the positive variety for the economy to have that added confidence. It wouldn't surprise me if we go a little bit longer.'

The Fed's bond-buying program has supported demand for base metals by stoking activity in industries that consume the metals, such as construction and manufacturing.

Some market watchers said this week's moderate price gains were likely to be short-lived. Starting October 7, the base metals industry will gather in London for the exchange's annual LME Week.

'In the run-up to LME week in London, global manufacturing is showing signs of improvement and base metals may get a short-term price lift,' noted Barclays analysts in a report on Friday.

The bank added that emerging markets, big consumers of commodities, still look fragile, with much of the improvement in Chinese growth stemming from policy support to stabilise rather than boost growth.

Recent price gains will be difficult to sustain, said the bank, without a corresponding improvement of the supply-and-demand fundamentals that underlie industrial metal prices.

'We favour selling into this price strength,' it said. - bigpondnews.com

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Natural gas futures - Weekly review: September 23 - 27

                   Natural gas futures ended Friday’s session marginally higher, as investors returned to the market to close out bets on lower prices after futures bounced off a key support level on Thursday.

On the New York Mercantile Exchange, natural gas futures for delivery in November inched up 0.6% on Friday to settle the week at USD3.589 per million British thermal units. 

Nymex gas prices settled 0.6% higher on Thursday at USD3.567 per million British thermal units, as a round of bargain buying and short-covering kicked in after prices tumbled to a five-week low of USD3.450 earlier in the session.

Despite Friday’s modest gains, the November natural gas still contract lost 4.4% on the week.

Prices tumbled to the lowest level since August 27 on Thursday after the U.S. Energy Information Administration said natural gas storage in the U.S. rose by 87 billion cubic feet last week, above market expectations for an increase of 76 billion cubic feet.

Inventories increased by 79 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a build of 75 billion cubic feet.

Total U.S. natural gas storage stood at 3.386 trillion cubic feet as of last week, nearly 1% above the five-year average for the same week and approximately 5% below last year's unusually high level.

Early injection estimates for this week’s storage data range from 82 billion cubic feet to 100 billion cubic feet, compared to a 77 billion cubic feet increase during the same week a year earlier.

The five-year average for the week is a build of 82 billion cubic feet.

Prices turned higher towards the end of the session as market players closed out bets on falling prices to lock in gains ahead of the expiration of the October contract on Thursday.

Meanwhile, 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 and Midwest for the next 10-to-14 days.

Demand for natural gas tends to fluctuate in the autumn based on cold weather and heating demand.

Elsewhere in the energy complex, light sweet crude oil futures for November delivery settled at USD102.87 a barrel by close of trade on Friday, losing 1.8% on the week. 

Meanwhile, heating oil for November delivery fell 0.79% on the week to settle at USD2.982 per gallon by close of trade Friday. - investing.com

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Crude oil futures - Weekly review: September 23 - 27

                New York-traded crude oil futures ended Friday’s session close to an 11-week low, as growing worries over a looming U.S. government shutdown and receding fears over a disruption to supplies from the Middle East weighed. 

On the New York Mercantile Exchange, light sweet crude futures for delivery in November declined 0.15% on Friday to settle the week at USD102.87 a barrel by close of trade. 

Prices fell by as much as 0.65% earlier in the day to hit a session low of USD102.37 a barrel, close to an 11-week low of USD102.20 a barrel hit earlier in the week.

The November contract settled 0.35% higher at USD103.03 a barrel on Thursday.

Oil futures were likely to find support at USD102.13 a barrel, the low from July 8 and resistance at USD105.09 a barrel, the high from September 23.

On the week, Nymex oil futures lost 1.8%, the third consecutive weekly decline.

Concern that U.S. lawmakers will fail to arrange a budget deal preventing a government shutdown next week dampened the appeal of growth-linked assets.

Congress must pass a short-term budget by midnight on Monday in order to avoid a government shutdown. 

Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare.

Later this month, Congress will have to extend the U.S. debt ceiling which the U.S. Treasury Department has estimated will be reached by October 17.

Meanwhile, concerns over a disruption to supplies from the Middle East continued to fade away after the U.S. and Russia agreed on a draft U.N. Security Council resolution aimed at eliminating chemical weapons in Syria.

Futures 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 5% after the U.S. and Russia reached a diplomatic solution on how to handle Syria’s chemical weapons on September 14.

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.

Thawing tensions between the U.S. and Iran also added to the selling pressure.

The two countries began talks on Thursday to resolve their ongoing standoff over Tehran's nuclear program.

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 shed 0.55% on Friday to settle the week at USD108.63 a barrel.

On the week, the London-traded Brent contract lost 0.55%, while the spread between the Brent and the crude contracts stood at USD5.76 a barrel by close of trade on Friday.

In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report, for indications on whether the economic recovery is sufficiently strong for the Federal Reserve to start rolling back its USD85-billion-a-month bond-buying program. 

The Fed’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.

Markets will also be watching developments in U.S. budget negotiations, as well as key manufacturing data out of China 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 23 - 27

                 Gold futures rallied 1% to hit a one-week high on Friday, as concerns over a possible U.S. government shutdown and hopes of continued stimulus from the Federal Reserve boosted sentiment on the precious metal.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery rose 1.15% on Friday to settle the week at USD1,339.20 a troy ounce. 

Gold futures rose by as much as 1.5% earlier in the session to hit a daily high of USD1,344.40 a troy ounce, the strongest level since September 10. 

The December contract settled 0.9% lower at USD1,324.10 a troy ounce on Thursday.

Gold futures were likely to find support at USD1,306.20 a troy ounce, the low from September 24 and resistance at USD1,366.50, the high from September 20.

On the week, the precious metal advanced 0.5%, the second consecutive weekly gain.

Concern that U.S. lawmakers will fail to arrange a budget deal preventing a government shutdown next week boosted the safe-haven appeal of the precious metal.

Congress must pass a short-term budget by midnight on Monday in order to avoid a government shutdown. 

Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare.

Later this month, Congress will have to extend the U.S. debt ceiling which the U.S. Treasury Department has estimated will be reached by October 17.

Meanwhile, gold traders continued to watch speeches from Federal Reserve officials for clues on monetary policy.

Speaking on Friday, Chicago Federal Reserve Bank President Charles Evans said that there is a chance the central bank will not move to taper its bond-buying program until early 2014.

His comments came after three top Fed officials said on Thursday the central bank had confused markets over its policy outlook.

Mixed U.S. economic data on Friday further added to uncertainty about how quickly the Fed will scale back its USD85-billion-a-month bond-buying program. 

The Thomson Reuters/University of Michigan consumer sentiment index fell to a four-month low of 77.5 in September from 82.1 the previous month.

Separately, official data showed that U.S. personal spending rose 0.3% in August, in line with expectations, after an upwardly revised 0.2% increase the previous month.

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 precious metal is on track to post a loss of nearly 21% 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.

The central bank is scheduled to meet October 29-30 to review the economy and assess policy.

In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report, for indications on whether the economic recovery is sufficiently strong for the Fed to start rolling back its stimulus program. 

Markets will also be watching developments in U.S. budget negotiations.

Elsewhere on the Comex, silver for December delivery inched up 0.3% on Friday to settle the week at USD21.83 a troy ounce. Silver prices settled 0.55% lower at USD21.76 on Thursday.

On the week, silver future prices declined 0.4%, the third consecutive weekly loss.

Meanwhile, copper for December delivery advanced 0.7% on Friday to close the week at USD3.329 a pound. On Thursday, copper futures rallied 1.1% to settle at USD3.307 a pound.

Prices of the red metal advanced 0.3% on the week.

Copper traders will be closely watching key manufacturing data out of China next week, to gauge the economic strength of the world’s largest copper consumer.   - investing.com

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Crude Oil falls as output increases in Libya, Texas

              Crude Oil futures traded slightly lower during Tuesday’s Asian session as some of Libya’s previously lost production came back online and on news of increased output at the Eagle Ford Shale in South Texas. 

On the New York Mercantile Exchange, light, sweet crude futures for November delivery fell 0.27% to USD103.31 per barrel in Asian trading Tuesday. The November contract settled lower by 1.11% at USD103.59 per barrel on Monday. 

Oil has declined in sharply in recent weeks has tensions in Syria have ebbed. In another sign a more docile near-term environment in the usually volatile Middle East, Iran has reportedly freed 80 political prisoners before President Hassan Rohani’s upcoming trip to the United Nations. Iran is the third-largest OPEC producer. 

Over the weekend, it was reported that Libyan output is on the rise after protesters reopened access to facilities late last week sent oil prices falling on Monday. Libyan production is expected to return to about 700,000 barrels per day in the coming weeks, well above recent levels of 243,000 barrels. 

Still, at 700,000 barrels per day, Libya’s oil output is roughly half what it was in early 2011 before the Arab Spring protests swept the Middle East. OPEC member Libya is home to Africa’s largest oil reserves. 

Elsewhere, the Texas Railroad Commission said the fields that comprise the Eagle Ford Shale are producing a combined 569,191 barrels per day, a 36% increase from last year. May output was revised to 656,853 barrels a day from the preliminary report of 617,884, according to Bloomberg. Eagle Ford is one of the largest oilfields in the U.S. 

Meanwhile, Brent crude futures for November delivery inched down 0.02% to USD107.98 per barrel on the ICE Futures Exchange. - investing.com

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