Gold price stays firm in European morning as the dollar continues to weaken against major currencies. We receive strong trade data from China yesterday but most investors only related strong imports to crude oil and base metals. This is understandable as China has become the world's largest gold producer.
However, strong imports can still help boost gold price, in an indirect way. Robust demand from China tightens physical markets and increases inflationary pressure. This will force the Chinese government to appreciate RMB, despite in a small magnitude. Appreciation in RMB is positive for commodity in general. At the same time, the disappointing US employment data in December may help reinforce the Fed's stance to keep its policy rate low for an extended period. An environment of low interest rate together with rising inflationary pressure is supportive for gold.
The strong momentum in Chinese commodity demand in 2009 should carry forward to 2010 although the pace may moderate due to unwinding of stimulus measures. Copper imports rebounded sharply to 369.4K metric tons in December (+29% yoy) after plunging to 263.1K metric tons in October. Imports reached a record high of 477.K metric tons in June. Iron ore and concentrate also recorded a prominent +80% yoy increase to 62.16M metric tons during the month. However, not all base metals received strong demand. Take a look at aluminum. Despite strong annual increase, the amount imported in December stayed at depressed level (-73% from record high made in April 2009). The reason is that Chinese production of aluminum rose in recent months and it's expected China will become a net exporter of aluminum in 2010.
Surge in demand for iron ore and concentrate has been driven by strong auto sales which drove demand for steel higher. According to the China Association of Automobile Manufacturers, China's sales of passenger cars, buses and trucks rose +46% to 13.6M units, the fastest pace in 10 years. This also suggested that China has taken over the US's throne as the world's largest auto market.
Crude oil price falls for a second day in European session. Currently trading at 81.75, the February contract has plummeted -2.6% from a 15-month high at 83.95 made yesterday. Apart from crude oil, others in the energy complex also gets hammered as weather in the Northern hemisphere is expected to get warmer later this week. Heating oil drops to 2.16 while gasoline falls to 2.135. Both
CRUDE REPORT:
Crude oil reversed gains after failing to test 84 in NY session Monday. The February contract ended the day at 82.52, down -0.3%. Currently trading at 81.9, the decline accelerates as the central bank of China rolled out more tightening and weather forecasts suggested temperature will turn warmer later this week.
The People's Bank of China (PBOC) sold 1-year bills at a yield of 1.8434% in open market operations. The yield has been staying at 1.7605% since August 2009. This may be a sign that China is trying to tighten the market more aggressively than expected. Last Thursday, PBOC offered RMB 60B worth of 3-month bills at 1.3684% in its weekly open-market operation, +4 bps higher than the rate kept since August. The move indicates that China would continue to guide market interest rates higher and absorb liquidity from the market through issuance of central bank notes.
Weather forecasts said that temperature will return to normal in eastern cities such as New York and Boston later this week. This news dampened bullishness as recent rally in energy price was driven by extremely cold weather in the Northern hemisphere. Traders believed the adverse weather condition should boost demand for energy.
Gold price settled at 1151.4, up +1%, after surging to as high as 1163 yesterday. A weak dollar may help push the yellow metal higher this week. Platinum extends its rally to 1602.5 in Asian session today. The benchmark outperformed others as the launch of the first US ETF spurred investment demand.
Last Friday, ETF Securities' first US platinum and palladium ETFs started trading with strong volume. Initial allocation of the platinum and palladium ETFs were 9,969 oz and 9,996 oz, respectively, volume traded on the first day (reflecting both primary and secondary trade) reached 414,742 shares for platinum and 294,943 shares for palladium. Platinum holdings in the non-US ETFs also rose modestly by +158 oz to hit a fresh high, while palladium holdings fell by -5.5k oz to 1.155M oz.
GOLD REPORT:
With 1119.5 support intact, Gold's choppy rise fro 1075.2 is still in favor to continue to 61.8% retracement of 1227.5 to 1075.2 at 1169.3. Break there will bring retest of 1227.5 high. On the downside, though, break of 1119.5 will suggest that such recovery has completed already and will flip intraday bias back to the downside for retesting 1075.2 support instead.
In the bigger picture, rise from 681 is expected to develop into a set of five wave sequence with first wave completed at 1007.7, second wave triangle consolidation completed at 931.3. Rise from 931.3 is treated as the third wave and has possibly completed at 1227.5 after missing 100% projection of 681 to 1007.7 from 931.3 at 1258. Deeper pull back could now be seen to 1026.9/1072 support zone, or even further to retest 1000 psychological level. But downside should be contained well above 931.3 support and bring up trend resumption to another high above 1227.5.
SILVER REPORT:
With 4 hours MACD crossed below signal line, an intraday top is in place at 18.925 and bias is turned neutral for the moment. Nevertheless, rise from 16.765 is still in favor to continue as long as 18.055 support holds. Above 18.925 will target retest on 19.50 high next. However, note that break of 18.055 will argue that rise from 16.765 has completed and will flip bias back to the downside for this support.
In the bigger picture, the stronger than expected rebound from 16.75 dampens the view that silver has topped out 19.50 and revives the possibility that rise from 12.435 is still in progress. Nevertheless, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Hence, even in case of another rise, upside is expected to be limited inside this 19.55/21.44 resistance zone and bring another medium term fall. On the downside, break of 16.765 support will revive the case that silver has topped out in medium term and will bring deeper decline towards lower medium term trend line at 14 level.
commodities reached 15-months Monday.
However, strong imports can still help boost gold price, in an indirect way. Robust demand from China tightens physical markets and increases inflationary pressure. This will force the Chinese government to appreciate RMB, despite in a small magnitude. Appreciation in RMB is positive for commodity in general. At the same time, the disappointing US employment data in December may help reinforce the Fed's stance to keep its policy rate low for an extended period. An environment of low interest rate together with rising inflationary pressure is supportive for gold.
The strong momentum in Chinese commodity demand in 2009 should carry forward to 2010 although the pace may moderate due to unwinding of stimulus measures. Copper imports rebounded sharply to 369.4K metric tons in December (+29% yoy) after plunging to 263.1K metric tons in October. Imports reached a record high of 477.K metric tons in June. Iron ore and concentrate also recorded a prominent +80% yoy increase to 62.16M metric tons during the month. However, not all base metals received strong demand. Take a look at aluminum. Despite strong annual increase, the amount imported in December stayed at depressed level (-73% from record high made in April 2009). The reason is that Chinese production of aluminum rose in recent months and it's expected China will become a net exporter of aluminum in 2010.
Surge in demand for iron ore and concentrate has been driven by strong auto sales which drove demand for steel higher. According to the China Association of Automobile Manufacturers, China's sales of passenger cars, buses and trucks rose +46% to 13.6M units, the fastest pace in 10 years. This also suggested that China has taken over the US's throne as the world's largest auto market.
Crude oil price falls for a second day in European session. Currently trading at 81.75, the February contract has plummeted -2.6% from a 15-month high at 83.95 made yesterday. Apart from crude oil, others in the energy complex also gets hammered as weather in the Northern hemisphere is expected to get warmer later this week. Heating oil drops to 2.16 while gasoline falls to 2.135. Both
CRUDE REPORT:
Crude oil reversed gains after failing to test 84 in NY session Monday. The February contract ended the day at 82.52, down -0.3%. Currently trading at 81.9, the decline accelerates as the central bank of China rolled out more tightening and weather forecasts suggested temperature will turn warmer later this week.
The People's Bank of China (PBOC) sold 1-year bills at a yield of 1.8434% in open market operations. The yield has been staying at 1.7605% since August 2009. This may be a sign that China is trying to tighten the market more aggressively than expected. Last Thursday, PBOC offered RMB 60B worth of 3-month bills at 1.3684% in its weekly open-market operation, +4 bps higher than the rate kept since August. The move indicates that China would continue to guide market interest rates higher and absorb liquidity from the market through issuance of central bank notes.
Weather forecasts said that temperature will return to normal in eastern cities such as New York and Boston later this week. This news dampened bullishness as recent rally in energy price was driven by extremely cold weather in the Northern hemisphere. Traders believed the adverse weather condition should boost demand for energy.
Gold price settled at 1151.4, up +1%, after surging to as high as 1163 yesterday. A weak dollar may help push the yellow metal higher this week. Platinum extends its rally to 1602.5 in Asian session today. The benchmark outperformed others as the launch of the first US ETF spurred investment demand.
Last Friday, ETF Securities' first US platinum and palladium ETFs started trading with strong volume. Initial allocation of the platinum and palladium ETFs were 9,969 oz and 9,996 oz, respectively, volume traded on the first day (reflecting both primary and secondary trade) reached 414,742 shares for platinum and 294,943 shares for palladium. Platinum holdings in the non-US ETFs also rose modestly by +158 oz to hit a fresh high, while palladium holdings fell by -5.5k oz to 1.155M oz.
GOLD REPORT:
With 1119.5 support intact, Gold's choppy rise fro 1075.2 is still in favor to continue to 61.8% retracement of 1227.5 to 1075.2 at 1169.3. Break there will bring retest of 1227.5 high. On the downside, though, break of 1119.5 will suggest that such recovery has completed already and will flip intraday bias back to the downside for retesting 1075.2 support instead.
In the bigger picture, rise from 681 is expected to develop into a set of five wave sequence with first wave completed at 1007.7, second wave triangle consolidation completed at 931.3. Rise from 931.3 is treated as the third wave and has possibly completed at 1227.5 after missing 100% projection of 681 to 1007.7 from 931.3 at 1258. Deeper pull back could now be seen to 1026.9/1072 support zone, or even further to retest 1000 psychological level. But downside should be contained well above 931.3 support and bring up trend resumption to another high above 1227.5.
SILVER REPORT:
With 4 hours MACD crossed below signal line, an intraday top is in place at 18.925 and bias is turned neutral for the moment. Nevertheless, rise from 16.765 is still in favor to continue as long as 18.055 support holds. Above 18.925 will target retest on 19.50 high next. However, note that break of 18.055 will argue that rise from 16.765 has completed and will flip bias back to the downside for this support.
In the bigger picture, the stronger than expected rebound from 16.75 dampens the view that silver has topped out 19.50 and revives the possibility that rise from 12.435 is still in progress. Nevertheless, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Hence, even in case of another rise, upside is expected to be limited inside this 19.55/21.44 resistance zone and bring another medium term fall. On the downside, break of 16.765 support will revive the case that silver has topped out in medium term and will bring deeper decline towards lower medium term trend line at 14 level.
commodities reached 15-months Monday.
