Oil And Gold Analysis: October 2, 2013
ICM Brokers | Oct 02, 2013 05:14AM ET
CL
Crude prices fell on Tuesday on fears that a U.S. partial government shutdown that kicked in early Tuesday will weigh on recovery and cut into demand for fuel and energy going forward. On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD101.27 a barrel during U.S. trading, down 1.04%. The U.S. Congress on Monday failed to agree on a spending package due to disputes over President Barack Obama's healthcare reform law, which prompted a partial government shutdown that began Tuesday. Concerns that widespread furloughs of federal workers along with fiscal uncertainties in general will weigh on recovery sent prices falling. Offsetting losses, however, were sentiments that the Federal Reserve will keep its monthly $85 billion bond-buying program in place to offset any fiscal uncertainty's effects on recovery. Fed asset purchases weaken the greenback by driving down interest rates to spur recovery, making oil a nicely-priced commodity on dollar-denominated exchanges. Elsewhere, the Institute for Supply Management reported that its manufacturing purchasing managers’ index rose to 56.2 in September from 55.7 in August, which also cushioned oil's losses. Analysts had expected the index to decline to 55.0.
GOLD
Gold futures posted the biggest loss since July, dropping to a seven-week low, on bets that a U.S. government closure will be short-lived, damping demand for the metal as a haven. Silver also slumped. The U.S. government began its first partial shutdown in 17 years, idling as many as 800,000 federal employees, closing national parks and halting some services after Congress failed to break a partisan deadlock. Parts of the economy that depend on the government “would be hamstrung,” President Barack Obama said before the deadline. Purchases by India, the world’s largest consumer, may fall 5.3 percent this year to 800 metric tons in the 12 months through March, compared with 845 tons a year earlier, Economic Affairs Secretary Arvind Mayaram said today. The nation raised the tax on gold imports for a third time this year in August to curtail demand and tackle a record current-account deficit. Sterling Smith, a Chicago-based commodity futures specialist at Citigroup Inc., said in a telephone interview. Investors amassed a record 2,632.5 tons of ETP gold holdings in December amid concern that stimulus would spur inflation. U.S. consumer prices grew at a 1.5 percent annual rate in August, compared with a 10-year average of 2.4 percent, Labor Department data showed Sept. 17.
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