The Bullion shine: How global Gold fared in the past week

LONDON   The bulk of the complex posted gains over the week, with gold prices closing at an 11-month high as the macro environment has become increasingly supportive.
Gold has consolidated its gains but has yet to breach $1800/oz as equity markets have edged higher and the dollar has weakened. Gold has been looking to macro events for reinforcement, and the ECB leaving rates unchanged in line with expectations has not derailed gold’s trajectory, but non-farm payrolls being broadly in line with expectations has triggered some profit-taking.
“Our FX strategists look for the EUR/USD to strengthen to 1.35 in three months, removing a sticky hurdle for gold prices.” Barclays said.
In terms of non-macro headwinds, the physical market has started to show signs of support, although it remains weaker than the seasonal norm. While markets remain closed with the week-long National Day holiday in China, local dealers in India have reported a pickup in gold buying as local prices have eased from record highs as the INR has strengthened against the USD to levels last seen in mid-April.
Meanwhile, scrap selling has started to slow in Indonesia and Singapore. Earlier in the week, reports highlighted the surge in scrap supply, with local dealers and the trade body estimating supply from India at 200-300 tons this year, compared with 58.5 tons last year.

The Crude Oil week: Of barrels and bullets

Crude oil markets have mirrored the price movement over the previous week, in that it has eased over the early half only to rebound by the end of the week. Front-month Brent continues to oscillate around the $111/bbl mark, while the equivalent WTI contract has once again bounced back after inching below the $90/bbl mark.
Geopolitical risks continue to escalate, with protests reported in Iran following the sharp depreciation of its currency, while tensions have escalated on the Turkish-Syrian border.
Fundamentally, the supply system has a cocktail of positives and shortfalls, both among OPEC and non-OPEC producers. Starting with the positives, Iraqi oil exports are showing strong growth due to recent capacity expansion at its southern fields and export system.
Further, with the central government and the Kurdistan region reaching an agreement on oil revenue sharing, exports have resumed from the former region as well, which has helped buoy output. This week saw a further firming of this agreement, as Baghdad made the first set of payments.
Although output is increasing, Barclays continues to highlight the geopolitical situation in the region that continues to pose a risk to output levels from the country. Further in the non-OPEC, Russian production continues to grow as well, although exports have been limited by strong demand within the FSU.
While the positives on the supply side are welcomed by a market with limited supply buffers, the tally of shortfalls continue to build up as well.
This week saw further cargo delays in the North Sea. Three more Forties crude cargoes for export in October were delayed, bringing the total deferrals for the month to ten. The delays are a result of longer-than-expected maintenance at UK’s biggest oil field Buzzard (200 thousand b/d), as well as reduced output from other North Sea fields.
Among the OPEC producers, shortfalls in Nigeria have come to the spotlight again as on Sunday, a fire on the Bomu-Bonny trunk line has affected about 150 thousand b/d of Nigerian Bonny light exports. So far, although Shell has not declared force majeure for Bonny light exports so far, two October loadings of cargoes have been delayed.
Finally, in terms of data releases, the weakness in Brazilian output continues to persist. Output from the country touched a 22-month low in August. The latest data peg total output at 2.096 mb/d, lower y/y by 43 thousand b/d (- 2%). NGL output growth was flat, and the weakness was due entirely to the falling crude profile, pegged at 2.006 mb/d (46 thousand b/d lower y/y).
Along with the delays in bringing new fields online, the weakness was pronounced in August because of scheduled maintenance at the giant Rancador and Marlim Leste fields in the Campos Basin. Further risks to production were expected in September as offshore drilling contractors Transocean and Chevron were served with injunctions to shut in their oil production. The injunctions were issued as part of a civil case involving last November’s oil spill at the Frade field. If the injunction had gone through, this would have dented Brazilian output significantly. However, Brazil’s court lifted the injunction on Transocean on 1 October.
With regards to Chevron, the court has not lifted the full ban, asking the company to continue only those activities related to the mitigation and monitoring of the November oil spill in the Frade offshore field. In the year-to-date, Brazilian production growth is now flat. Overall, Barclays expects Brazilian output to decline y/y by 60 thousand b/d in 2012.

Epic Debate: It is Jim Rogers Vs. Marc Faber on China

Jim Rogers reply that he is bullish on China and he believes that China is about to become the greatest country in 21st century. “I only buy China when it collapses” he said, and added that he bought into Chinese assets thrice: 1999, 2005 and 2008 November when there were collapses.

While the investment gurus Jim Rogers and Marc Faber agree on certain points in a CNBC TV debate, there are instances where they disagree.
For example China: Marc points out that China’s bench mark stock index the Shanghai Stock Exchange Composite Index was at 6100 in 2007 even as it is currently at 2086 levels these days; how would Jim Rogers be able to maintain that he is bullish on China?
Jim Rogers reply that he is bullish on China and he believes that China is about to become the greatest country in 21st century. “I only buy China when it collapses” he said, and added that he bought into Chinese assets thrice: 1999, 2005 and 2008 November when there were collapses.
“But there is a huge difference when one says that China is going to be the greatest country in 21st century and one should buy Chinese stocks” Jim Rogers stressed. “But I do buy Chinese stocks and would buy more if China collapses.” he said. And I buy them for my daughters; one day they may say that, “old man was a smart guy.”
Marc Faber meanwhile is bullish on Russia, as per Jim Rogers.
On US’ QE initiatives, Jim Rogers said that the biggest problem with authorities is that, “they think they know what they are doing” which actually may not be the case.
On Romney and Obama, Jim said, “they are both the same” to which Marc Faber agreed.
Jim Rogers mentioned that he is long on commodities and currencies and short on stocks. “If money printing continues by central bankers, bond markets would collapse and interest rates would shoot up.” he added.

Merkel to visit Greece next week; Rumors of imminent Spanish bailout denied

The trading week, dominated by contradictory reports concerning the Spanish bailout, ends with European markets in the green, after the sentiment was boosted on Thursday by ECB's announcement that its bond-buying program could be activated whenever needed. Following the release of the solid US NFP data for September EUR/USD broke above the 1.3030 level.

Samaras and Merkel to meet in Athens next Tuesday

German Chancellor Angela Merkel will travel to Greece on October 9 to hold talks with PM Anotnis Samaras. This is the first time since the onset of the crisis that the German leader will visit Athens. Greek labor unions are planning a rally outside the parliament on Tuesday to demonstrate their opposition towards the visit

Earlier on Friday Samaras warned that Greece was running out of funds and that it was crucial for the country to receive the next tranche of the bailout money before the end of November, in order to prevent it from defaulting on its debts. On Saturday the Greek government will meet with Troika inspectors for the last time before the October 8 EcoFin meeting, in an attempt to reach an agreement on the remaining 2 billion euros of austerity measures.

"The troika is demanding above all further cuts to pensions and wages. That is very difficult, because we are already bleeding," Samaras said in an interview for the German daily Handelsblatt. "The existing cuts already go to the bone. We are at the limit of what we can expect of our population."

Eurogroup considers Spanish bailout unnecessary

A EU official told reporters on Friday that Spanish banks would not be recapitalized through the ESM this year and that the exact timing of the procedure was not known yet. He added that the Eurogroup also did not see the need for a complete Spanish bailout such as those granted to Greece, Ireland or Portugal.

The official said that the results of the latest Spanish debt auctions were satisfactory and that the situation on the financial markets improved considerably over the last six months. Eurozone finance ministers, who will hold a meeting on October 8, will discuss the situation in Spain, but they do not expect that Mariano Rajoy's government will ask for the activation of the ESM.

These declarations further contradict rumors of an imminent request for a Spanish bailout, which have been circulating in recent days. On Tuesday Mariano Rajoy said that such a request would not be made in the nearest future while on Thursday night Finance Minister Luis de Guindos denied that Spain needs a bailout at all.

Spanish FinMin denies that Spain needs a bailout

During a lecture at the London School of Economics Spanish Finance Minister Luis de Guindos told the audience that Spain does not need a bailout, despite the increasing rumors that the country might officially ask for aid as soon as this weekend. He said that what the country really needs is ECB's intervention on the secondary market of government bonds under certain conditions.

Referring to the harsh austerity measures, introduced recently by the Spanish government and triggering violent protests in Madrid Luis de Guindos assured that “what we are doing is what we think is the correct thing not only for Spain but for the future of the Eurozone."

During Luis de Guindos's speech a group of young Spaniards protested by displaying placards with the inscription “Spain for Sale.”

Metals sell off in U.S. economic number anticipation

Gold futures moved lower in European trade Friday as profit takers hit the yellow metal while investors anticipate crucial numbers from the U.S. economy later in the session.

On the Comex division of the New York Mercantile Exchange, Gold futures for December delivery traded at USD1793.75 a troy ounce slipping 0.15%.

It earlier traded at a session high USD1798.05 a troy ounce. Gold was likely to find support at USD1765.75 and resistance at USD1798.05.
Gold prices advanced Thursday, after ECB President Mario Draghi reiterated that the central bank was ready to start purchasing the debt of troubled euro zone states.

Speaking at the ECB’s post-policy meeting press conference earlier in the day, Draghi said the central bank was ready to undertake Outright Monetary Transactions when the prerequisites are in place.

Draghi reiterated that the central bank was acting strictly within its mandate in undertaking a bond buying program via OMT’s.

The ECB left rates on hold at a record low 0.75% earlier, in a widely anticipated decision.

Meanwhile, the minutes of the Federal Reserve's September policy meeting showed that the central bank is moving toward linking its outlook for near-zero interest rates to specific economic conditions such as a decline in the unemployment rate.

On Thursday, the Department of Labor said the number of people who filed for unemployment assistance in the U.S. last week rose to 367,000, compared to expectations for an increase of 7,000 to 370,000.

Investors were eyeing the release of key U.S. jobs data, including the nonfarm payrolls for September, later in the session.

US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.04% to trade at USD79.46.

Elsewhere on the Comex, Silver for December delivery dropped 0.16% to trade at USD35.995 a troy ounce while Copper for December delivery gave back 0.08% to trade at USD3.783 a pound.

Crude drops on profit-taking, shrugs off strong U.S. jobs data

Crude oil futures fell on Friday amid profit-taking, as investors shrugged off surprisingly strong U.S. employment data.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded at USD89.46 a barrel on Friday, down 2.45%, off from a session high of USD91.65 and up from an earlier session low of USD89.03.

Oil ignored otherwise bullish data.

The U.S. unemployment rate fell to 7.8% percent in September from 8.1% in August, the Bureau of Labor Statistics reported earlier Friday.

Employers added a net 114,000 jobs in September, while households reported that total employment rose by 873,000 in September following three months of little change.

The number of unemployed Americans stands at 12.1 million, the fewest since January 2009.

Oil gained when the news broke but later fell amid profit-taking on sentiment that despite the improvement, not enough new jobs were created last month.

More workers took on part-time jobs last month, which accounted for the drop in the headline unemployment rate.

On the ICE Futures Exchange, Brent oil futures for November delivery were up 2.94% and trading at USD111.34  a barrel, up USD21.88 from its U.S. counterpart.

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Gold drops despite solid U.S. employment figures

 Gold prices fell in U.S. trading on Friday as investors sold the precious metal for profits, shrugging off solid unemployment data that sent gold's traditional hedge, the dollar, dipping.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery were down 0.94% at USD1,779.85 a troy ounce, up from a session low of USD1,774.95 and down from a high of USD1,798.05 a troy ounce.

Gold futures were likely to test support at USD1,774.95 a troy ounce, the earlier low, and resistance at USD1,798.05, the earlier high.

The U.S. unemployment rate fell to 7.8% percent in September from 8.1% in August, the Bureau of Labor Statistics reported earlier Friday.

Employers added a net 114,000 jobs in September, while households reported that total employment rose by 873,000 in September following three months of little change.

The number of unemployed Americans stands at 12.1 million, the fewest since January 2009.

Gold fell shortly after the news broke on sentiment that not enough new jobs were created last month and would likely not alter U.S. monetary policy.

More workers took on part-time jobs last month, which accounted for the drop in the headline unemployment rate.

Gold has risen in recent sessions due to loose monetary policies around the world, in the U.S. especially.

The U.S. Federal Reserve is currently running a third round of quantitative easing, a monetary stimulus tool that sees the U.S. central bank buy USD40 billion in mortgage-backed securities a month on an open-ended basis to spur recovery.

Such policy tools weaken the greenback and make gold an attractive hedge.

Elsewhere on the Comex, silver for December delivery was down 1.78% and trading at USD34.475 a troy ounce, while copper for December delivery was down 0.56% and trading at USD3.765 a pound.

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