Brent Crude Oil rose above $112 a barrel & Gold Prices ticked above $1695 after Japan pledged to pump more money into its economy, adding to positive growth signals from the US and China, the world’s top Crude Oil consumers. Gold is nearing the $1,700 per troy ounce mark & WTI Crude Oil Futures hovering around $96.70. A stronger Japan is good for the global economy. China is on track to recover from its longest growth slowdown since the global financial crisis while economic data from the United States has improved. Japan’s central bank announced its most determined effort yet to lift the country out of economic stagnation, saying it would expand asset purchases and double its Inflation target to 2%. The stimulus plan seems to be more positive for Base Metals than energy as Japan will be building infrastructure that will increase demand for metals such as zinc and copper. A broader economic optimism in global markets and worries about Crude Oil supply disruption in the Middle East and North Africa have lifted Crude Oil Prices at the start of the year although investors tread cautiously as a deadline to settle U.S. debts draws near. China – the world’s second-largest Crude Oil consumer is expected to post stronger demand of 460,000 barrels per day in 2013, up from 330,000 bpd last year. The strength of fourth-quarter demand partly reflects the start-up of new Crude Oil refining capacity and a surge in product exports as well as better domestic demand for gasoline and diesel, plus lower fuel oil imports to feed small local refiners. The National Association of Realtors reported Tuesday that existing-home sales fell to 4.94 million in December from 5.04 million in November. Consensus among economists polled by Thomson Reuters had expected sales to rise at a seasonally adjusted annual rate of 5.1 million units. The housing market has proven resilient in recent months in a sign that the US Economy has continued to strengthen despite sustained high unemployment rates and sluggish growth in the private sector.
Canadian light Crude Oil flows to Europe in rare arbitrage –trade:
Light sweet Canadian offshore Crude Oil has arrived in Northwest Europe in a rare arbitrage movement as the U.S.shale oil boom edges out Canadian oil, which must seek alternative markets, traders and shipping sources said. A 1 million barrel cargo of Canadian light sweet Hibernia has been booked for Valero’s Pembroke refinery loading Jan. 23-24, the sources said. In late December to early January, the tankers Overseas Acadia and Value discharged 600,000 barrels each of Canadian sweet crude at the Birkenhead port in Liverpool on Britain’s east coast, the sources said and Reuters AIS Live ship tracking showed. The Birkenhead terminal is connected to the Stanlow refinery, owned by India’s Essar. A company spokesman declined to confirm these precise shipments but said Stanlow had previously taken Canadian Crude Oil.
German Confidence adds to Crude Oil Momentum:
Crude Oil Futures Prices rose as German investor confidence climbed to a 2 1/2-year high. Crude Oil Futures rose as much as 0.3% after Germany’s ZEW Center for European Economic Research said its index of investor and analyst forecasts climbed to 31.5 from 6.9 last month. Global investors are the most bullish on stocks in at least 3 1/2 years, with almost two-thirds planning to boost their holdings during the next six months, a Bloomberg survey showed. Eurozone finance ministers yesterday approved a payout of 9.2 billion euros ($12.3 billion) to Greece this month. Brent Crude Oil for March settlement climbed as much as 77 cents to $112.48 a barrel. Crude Oil’s advance in New York may stall as a technical indicator shows futures have climbed too quickly for further gains to be sustainable.
Crude Oil – The Black Gold Leads Gold up:
The US Dollar has a softer tone leading Gold higher after a Bank of Japan meeting and stronger-than-forecast German ZEW reading on economic sentiment. Gold edged up and Tokyo Gold (Gold in Yen) hit a record multi-year high after the Bank of Japan announced a bold, some would say reckless, $117 billion ‘stimulus’ program as expected. The BOJ’ package included doubling its inflation target to 2% and making an open-ended commitment to asset purchases from next year. This open ended policy surprised some that expected a small rise in the BOJ’s $1.1 trillion asset-buying and lending program. Bank of Japan move signals possible inflation down the road as well as continued return to Gold from first weeks of the year by funds. Gold Prices trend to move downside as economic indicators show signs of longer-term improvement but the looming US Debt Ceiling issue seems to provide the much needed floor to Gold Prices. Goldman Sachs looks for the combination of higher U.S. taxes, the debt ceiling debate and scheduled spending cuts to support Gold Prices for the next three months. “We expect that the uncertainty associated with these issues combined with our economists’ forecast for weak U.S. GDP growth in 1H2013 following the negative impact of higher taxes will push Gold Prices to our 3-mo(nth) $1,825/toz forecast. Such an increase would be consistent with prior gold rallies into debt ceilings,” Goldman says. “As a result, we see current Gold Prices as a good entry point to re-establish fresh longs in the Gold Market and believe that current Gold implied volatility levels are too low relative to these upcoming catalysts.” “Our modeling of Gold Prices suggests that the improving growth outlook will matter most and that Gold Prices will likely decline in 2H 2013, even with continued central bank and ETF (exchange-traded-fund) Gold Demand.” Open interest has been rising in Comex Gold, with funds coming back into the market during the first weeks of the New Year.
Crude Oil & Gold Technically Speaking:
The import duty hike news from India has had virtually no impact on the price of spot Gold or Futures till now. Gold Prices have been consolidating higher since early January and could surge sharply given a catalyst. While planning more Quantitative Easing, the BOJ appeared reluctant to be as aggressive as the new government wanted, with the open-ended easing not starting until 2014 when the current program ends. Gold and Silver Market traders tend to monitor dollar moves since these can influence the precious and base metals alike.
I had alerted Jan 9 that Crude Oil has surpassed a strong resistance of $90 with reasonable strength & can be expected to retain momentum till above this level. Occasional dips on higher Crude Oil inventory reports could push Crude Oil close to $90 & the same should be used for buying for the medium term. I have a strong feeling that Crude Oil may rise well above $98.20 to $100 in the medium term. Sell orders tend to be clustered only near resistance levels. Overall, the markets remain firm. We do see wobbles during the course of the day but it is quite clear that we have a short- to medium-term uptrend in place and that’s consistent with the global industrial growth expectations. MCX Crude Oil in India is trading up at Rs. 5199 & can rise further to Rs. 5257 to 5293 also. Gold as alerted Jan 15 – For the immediate future, the $1630 seems a strong support, while there seems a reasonable resistance at $1720, which if surpassed on the wave of the Credit Rating Downgrade Risk or the Debt Ceiling issue, could lead higher to $1810 & then $1855. When partisan gridlock last brought the US government to the brink of default in August 2011, Gold Prices shot up to the highest rate ever till date. I again repeat my often made statement that, Gold will need Gigantic strength to rise above $1855 & I do not foresee that occurring anytime soon. The lower end bottom seems to be forming around $1540 to $1495 range. I now expect the declines in Gold to be more Dramatic than the Rises.
Be very cautious of the resistance in Crude Oil in the $98.20 to $100 range & in Gold around $1720.