Monday, November 15, 2010

Narrow Trading Continues Ahead of US Retail Sales

Commodities continue to in a consolidative manner in European session after Friday's selloff as the market awaits the next step the Chinese government walks in curbing inflation. Investors also hold breath as Ireland will discuss with EU officials on its financial problems in Brussels tomorrow. The front-month contract for WTI crude oil price hovers around 85 while fuel prices also grind higher. Gold changes little, trading below 1380 in both Asian and European session. PGMs extend weakness with platinum and palladium plunging below 1680 and 670 respectively.

Worries about Chinese tightening have weighed on oil and base metal prices as the government's measures, such as rate hike and raise in RRR, limit investments and hence, demand for these commodities. Indeed, China's impacts extend to precious metals. Recall that when the People's Bank of China raised near term interest rates last month (October 19), gold price slumped with the benchmark COMEX contract falling from 1371.7 to 1328 on that day. The impacts on PGMs will be as big as base metals as China is the world's largest auto producer and consumer.

According to Bombay Bullion Association, India’s gold imports jumped +65% y/y in October as driven by Diwali. India’s demand for other commodities such as oil and agricultural products should also surge in coming years. EIA’s Short-term Energy Report forecast annual growth in oil demand in India will be +7.95% in 2010 and +4.21% in 2011. The pace will exceed that of China (2010:+4.26%; 2011: 0.00%) although the absolute amount is still small.


Posted courtesy of Oil N Gold.Com


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