Fears of slower international economic growth coupled with a sharp appreciation of the USD against the EUR combined to drag commodity prices (USD terms) lower, said a report by Commonwealth Bank of Australia on Friday.
It also mentioned that the recent US economic data has been soft, with data released earlier this week showing that the US ISM manufacturing index declined in September, while US auto sales had been weak in September.
Moreover, commodity markets are increasingly concerned that the post-Olympics bounce in Chinese economic activity has been tepid.
The oil price fell back in response to the firmer USD and worries about the implications of weaker international economic growth for oil demand. NYMEX light sweet crude (November contract) touched $94/barrel. The gold price (spot) also slipped sharply, with selling related to the firmer USD and lower oil prices outweighing safe-haven related demand, it said.
“Markets are nervous, erratic and unpredictable, and investors are risk-averse. And so, commodities sold off relentlessly, driving prices down. Precious metals were hard hit, with silver taking the brunt, sacrificing 12.85%. Platinum lost 5.5%, palladium 4.3%, and gold 4.5%,” said a Standard Bank analyst Walter de Wet in a report.
Although platinum came under early selling pressure due to worse-than-expected US auto sales, precious metals were initially stable, the Standard Bank report said. However, the decision by the ECB not to cut interest rates, combined with a bearish statement on the Eurozone, triggered broad asset liquidation. The dollar then appreciated rapidly against most currencies. It went from $1.39 to a low of $1.3748 against the euro. As of now, it remains well below $1.39, it said.
“We foresee more disorder for markets. If the US House of Representatives passes the financial rescue package tonight, it would bring some relief, but not enough to restore confidence. Credit markets still have too much asymmetric information, which is inhibiting risk appetite. Against the backdrop of the slowdown in real economic activity globally, commodities will stay under pressure. These conditions would favour the US dollar and, because of little liquidity, gold could battle to rise much higher despite credit risk being high,” Walter said.
Analysts and traders are keeping an eye on the US non-farm payrolls due for release tonight. Markets expect a decline of 105K jobs. Anything more could see more money flee from commodities, the report said.
The Standard Bank report also mentioned that the yellow metal stayed on the back foot. Although it traded steadily lower in Asia and Europe, the weak euro dragged it down from around $870/oz to $865/oz. The major sell-off started just before the PM fix, and gold plunged to $830/oz as the US dollar strengthened. It closed at $842.50/oz. Primary support for gold is at $830/oz, and secondary at $820/oz and $803/oz. Resistance is at $864/oz, $892/oz, and $900/oz.
Morning trade was orderly, with the silver metal tracking gold, but the sell-off after gold's drop was merciless and Silver took a beating. Just before New York opened, silver slid to $11.80/oz. After failing to settle, it shed another 50c in US trade, closing at $11.05/oz. Primary support is at $11/oz and secondary at $10.30/oz-$10.25/oz. Primary resistance is at $12/oz, and secondary at $12.18/oz.
While Platinum sentiment remains negative the bearish economic data, scarce liquidity and the strong dollar are intimidating it. Platinum dropped early in Europe, from $1,040/oz to $980/oz. It then spent the day bouncing, and closed at $973/oz.
Palladium was pushed down all the way from $213/oz in Asia to $203/oz in Europe to $200/oz in the US, and closed at $199/oz. $200/oz is providing some support. Meanwhile Rhodium dropped more than $500/oz on Thursday, to $3,270/oz in New York.
It also mentioned that the recent US economic data has been soft, with data released earlier this week showing that the US ISM manufacturing index declined in September, while US auto sales had been weak in September.
Moreover, commodity markets are increasingly concerned that the post-Olympics bounce in Chinese economic activity has been tepid.
The oil price fell back in response to the firmer USD and worries about the implications of weaker international economic growth for oil demand. NYMEX light sweet crude (November contract) touched $94/barrel. The gold price (spot) also slipped sharply, with selling related to the firmer USD and lower oil prices outweighing safe-haven related demand, it said.
“Markets are nervous, erratic and unpredictable, and investors are risk-averse. And so, commodities sold off relentlessly, driving prices down. Precious metals were hard hit, with silver taking the brunt, sacrificing 12.85%. Platinum lost 5.5%, palladium 4.3%, and gold 4.5%,” said a Standard Bank analyst Walter de Wet in a report.
Although platinum came under early selling pressure due to worse-than-expected US auto sales, precious metals were initially stable, the Standard Bank report said. However, the decision by the ECB not to cut interest rates, combined with a bearish statement on the Eurozone, triggered broad asset liquidation. The dollar then appreciated rapidly against most currencies. It went from $1.39 to a low of $1.3748 against the euro. As of now, it remains well below $1.39, it said.
“We foresee more disorder for markets. If the US House of Representatives passes the financial rescue package tonight, it would bring some relief, but not enough to restore confidence. Credit markets still have too much asymmetric information, which is inhibiting risk appetite. Against the backdrop of the slowdown in real economic activity globally, commodities will stay under pressure. These conditions would favour the US dollar and, because of little liquidity, gold could battle to rise much higher despite credit risk being high,” Walter said.
Analysts and traders are keeping an eye on the US non-farm payrolls due for release tonight. Markets expect a decline of 105K jobs. Anything more could see more money flee from commodities, the report said.
The Standard Bank report also mentioned that the yellow metal stayed on the back foot. Although it traded steadily lower in Asia and Europe, the weak euro dragged it down from around $870/oz to $865/oz. The major sell-off started just before the PM fix, and gold plunged to $830/oz as the US dollar strengthened. It closed at $842.50/oz. Primary support for gold is at $830/oz, and secondary at $820/oz and $803/oz. Resistance is at $864/oz, $892/oz, and $900/oz.
Morning trade was orderly, with the silver metal tracking gold, but the sell-off after gold's drop was merciless and Silver took a beating. Just before New York opened, silver slid to $11.80/oz. After failing to settle, it shed another 50c in US trade, closing at $11.05/oz. Primary support is at $11/oz and secondary at $10.30/oz-$10.25/oz. Primary resistance is at $12/oz, and secondary at $12.18/oz.
While Platinum sentiment remains negative the bearish economic data, scarce liquidity and the strong dollar are intimidating it. Platinum dropped early in Europe, from $1,040/oz to $980/oz. It then spent the day bouncing, and closed at $973/oz.
Palladium was pushed down all the way from $213/oz in Asia to $203/oz in Europe to $200/oz in the US, and closed at $199/oz. $200/oz is providing some support. Meanwhile Rhodium dropped more than $500/oz on Thursday, to $3,270/oz in New York.
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