Threat of Cyber Attack and Release of Oil Reserves Weigh on Crude Oil

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Gold rose nearly 1%, on comments by German Chancellor Angela Merkel and disappointing US manufacturing and housing data fueled speculation that central banks could take measures to stimulate the economy.  Also the Chinese Premier signaled that the PBoC was ready to offer a stimulus package to try to get China back on track.

Gold futures for December delivery rose $12.60 to $1,619.20 an ounce.

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,258.15 tons, as on August 10. Silver holdings of iShares silver trust, the largest ETF backed by the metal, declined to 9,733.39 tons, as on August 15.

Worldwide gold jewelry demand fell 15%, on a year-over-year basis to 418.3 tons for the second quarter of 2012, largely due to a sharp decline in Indian jewelry demand, according to the World Gold Council. Gold jewelry accounted for 42% of global gold demand in the given period.

Indian gold jewelry demand in the second quarter of 2012 fell by 30% to 124.8 tons amid record high local currency gold prices due to depreciation in the rupee against the US dollar.

China’s gold jewelry demand dropped 9% on a year-over-year, to 93.8 tons, as Chinese consumers were discouraged by the slowing of GDP growth in the country during the second quarter.

The ICE dollar index, which measures the US unit against a basket of six major rivals, fell to 82.392 from 82.649 in North American trade late Wednesday. It touched a high of 82.881 earlier.

German Chancellor Angela Merkel appeared to back recent comments by the ECB President Mario Draghi and said his recent vow to do all necessary to defend the euro zone is in line with European leaders. Merkel also said time is of the essence in making progress on the euro zone sovereign debt crisis, adding that she feels European leaders are on the right track.

Copper rose more than a percent on Thursday, supported by a weaker dollar and expectations that recent financial data could spur growth supporting measures that would boost global metals demand. Among the Metal prices, Copper ended marginally higher by 0.1%, while Aluminum, Zinc and Nickel fell by 0.8%, 1% & 0.4% respectively.

Crude oil futures extended gains into a third session and rose above $95.5 per barrel, garnering support from lingering geo-political concerns and a weaker dollar to post a fresh three-month high.  Oil for September delivery notched up $1.27 to $95.60 a barrel. 

Overnight oil prices did an about face after three days of gains following reports that the U.S. was gearing up for a move to keep a lid on prices. Oil prices fell after news reports suggested the U.S. might tap its strategic reserves to slow the rising price of oil.

The black gold was finding support; however, on news of a cyber attack against Saudi Arabian oil giant Aramco as well as rising geopolitical tensions in the Middle East. The Saudi oil giant has said the attack has not affected production. However, Barclays added that in a market that is starting to focus more on geopolitical issues in the Middle East, the idea that there may be parties intending to sabotage oil operations is likely to be unsettling.

 It said “any attack against facilities that did cause any significant physical disruption of Saudi flows would open up the extreme upside for oil, in the context of the current deterioration of the geopolitical context for the Middle East as a whole.”

 Natural gasfutures declined in a choppy trading session, brushing aside a bullish inventory report released earlier in the day. The Energy Department’s Energy Information Administration reported that natural gas in storage grew by 20bn cubic feet to 3.261 trillion cubic feet for the week ended Aug. 10.

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About:FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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