Tag Archives: quantitative easing

Gold tumbles again, could see worst week in 30 years

21 Jun

Gold fell to a three-year low on Friday and was in danger of recording its biggest weekly drop in 30 years after the US Federal Reserve said it would wind down its bullion-friendly stimulus later this year.

Spot gold – down nearly 9 percent this week – dropped for the fifth straight session, while Comex gold futures also declined over 1 percent to their lowest in three years.

Fed Chairman Ben Bernanke said on Wednesday the central bank would taper its USD 85 billion monthly bond buying programme as the US economy was recovering strongly, ending purchases around mid-2014 if economic growth held up.

“What the market is undergoing now is a state of normalisation, going back to pre-stimulus times,” said Joyce Liu, investment analyst at Phillip Futures in Singapore.

“Since the first stimulus programme in 2009, markets have jumped despite fundamentals not justifying such a spike.”

Gold was also hurt by CME Group Inc’s move to raise initial margins for Comex gold after prices plunged over 6 percent on Thursday.

The exchange operator raised Comex 100 Gold Futures initial margins for speculators by 25 percent to USD 8,800 per contract from USD 7,040.

“That is definitely affecting gold too. For those who cannot put out margin calls on time, they will be squeezed out even when they don’t want to get out,” said Liu.

Until recently, gold – seen as a hedge against inflation – had gained as the global economy took a hit and central banks acted to boost their economies. Gold touched an all-time high of USD 1,920.30 in 2011.

Spot gold was down 0.5 percent at USD 1,271.16 an ounce by 0121 GMT on Friday. The metal fell to USD 1,269.04 earlier – its lowest since September 2010 and a level which would mark the worst weekly decline in 30 years.

It has lost 24 percent of its value this year, after recording 12 years of gains.

Gold is on weak technical ground and will fall below USD 1,200 an ounce before finding support, technical analysts said.

UBS lowered its 2013 gold price outlook by 10 percent to USD 1,440 an ounce, and its 2014 forecast to USD 1,325 an ounce from USD 1,625.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.42 percent to 995.35 tonnes on Thursday – the lowest in more than four years.

But the drop in prices could see a spurt in physical demand in top consumers India and China, which have been quiet recently.

However, Liu said the demand would not be as strong as April when gold prices fell the most in 30 years over just two days.

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Brent hovers near 10-week high, Fed meeting in focus

18 Jun

Brent crude futures were barely changed around USD 105, holding not far off their strongest level in 10 weeks, as investors remained cautious ahead of a US Federal Reserve meeting.

The Fed, whose two-day policy meeting starts on Tuesday, is under pressure to roll back some of the USD 85 billion in monthly bond purchases after advances in the US economy. Its three quantitative-easing schemes have buoyed prices of commodities.

At 0446 GMT, Brent was up 5 cents at USD 105.52 a barrel. It rose to 106.67 on Monday, the highest since April 4, on mounting tensions in the Middle East. US oil added 5 cents to USD 97.82 after hitting a nine-month high near USD 99 a barrel in the previous session.

“What I’m expecting is some indication of a slow, measured tapering of the bond-purchase programme by the Fed. It will cause some impact to markets at the start but I’m looking for minimal slippage at least for oil prices,” said Carl Larry, president of Houston-based Oil Outlooks and Opinions.

“In general any decision to taper would signal confidence in the ongoing recovery of the US economy, that is potentially an upside for markets depending on how investors take it.”

Global financial markets have been on edge since Fed Chairman Ben Bernanke suggested the central bank would be looking to taper its stimulus if the economy showed signs of improvement.

The oil market is also keeping an eye on a standoff over the civil war in Syria as world leaders lined up to pressure Russian President Vladimir Putin into toning down his support for Syrian President Bashar al-Assad on the second day of a G8 summit.

Although Syria is not key to global oil supply, investors are worried the civil war there could affect other countries in the Middle East and plunge the whole region into conflict

Any run-up on geopolitical risk would soon bump into a fundamental situation of ample supply and uncertain demand.

Stung by recent victories for Assad’s forces and their support from Hezbollah guerrillas, the United States said last week it would step up military aid to the rebels, including automatic weapons, light mortars and rocket-propelled grenades.

“The market has certainly built in a risk premium into prices, and this should keep it supported despite fundamentals suggesting that there is more than enough oil out there to buffer a disruption to any kind of supply from the region,” said Larry of Oil Outlooks and Opinions.

“But until we see some clear consensus between the likes of Russia and the US we shouldn’t expect to see an end in sight in Syria and that keeps the risk of the conflict spilling over and drawing in other regional entities much higher.”

US commercial crude oil stocks are expected to fall due to lower imports, according to a preliminary Reuters poll done on Monday.

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