Fundamental Market Overview
PRECIOUS-GOLD SLIPS ON U.S. JOBS DATA, FED EYED
Gold slipped on Friday as an encouraging U.S. jobs report boosted the dollar, though euro zone debt worries and unrest in the Middle East lifted bullion off lows. Positive nonfarm payrolls and manufacturing data confirmed a strengthening U.S. economy, but economists said the news was not enough to push the Federal Reserve away from an ultra-easy monetary stance that has helped Gold hit record highs. Spot Gold dropped 0.6 percent to $1,428.20 an ounce, sharply off its low at $1,412.55 hit earlier in the session. Bullion has risen about 0.5 percent this week for its second consecutive weekly gain. It hit a record $1,447.40 an ounce last week. U.S. Gold futures for June delivery settled down 0.8 percent at $1,428.90, with COMEX trading volume slightly below its 30-day average after strong turnover earlier this week partly due to contract rollover.
Gold recorded a 10th consecutive quarter of gains in the first three months of 2011, but it was the smallest rise since the financial crisis gripped markets in late 2008. A successful debt sale by Portugal on Friday did little to cull expectations it will soon join the euro zone bailout list, while Ireland's credit rating was cut after bank stress tests revealed another black hole. Despite a rally in energy prices, stagnant growth in wages does not bode well for Gold's inflation-hedge appeal, said Peter Buchanan, senior economist at CIBC World Markets.
HAWKISH FED COMMENTS, ECB IN FOCUS Even as most economists agree the Fed will not tighten monetary policy in the short term, recent hawkish comments by top Fed officials are weighing on bullion investor sentiment. Jeffrey Lacker, Richmond Fed president, said the U.S. central bank could raise interest rates by the end of the year to curb rising inflation. Gold tends to suffer when rates climb, as the opportunity cost of holding non-yielding assets increases.
Investment products such as Gold-backed exchange-traded funds saw less interest, with the No. 1 SPDR Gold Trust reporting its biggest ever quarterly outflow in the first quarter. U.S. Mint data showed Gold American Eagles sales were the strongest in the first quarter since the end of 2009, and quarterly sales of silver American Eagle coins rose to a record in the same period.
NYMEX-CRUDE JUMPS TO END AT HIGHEST SINCE 2008 U.S. Crude oil futures prices jumped more than 1 percent to its highest close in 2-1/2-years as supportive U.S. jobs data reinforced economic growth expectations and as Libya's conflict and Middle East unrest kept investors wary of threats to supply. U.S. nonfarm payrolls registered solid growth for a second month in March and the jobless rate hit a two-year low of 8.8 percent, helping fuel optimism about oil demand. Geopolitical supply risks also had oil traders wary, as Libya's conflict and Middle East unrest persist.
FUNDAMENTALS
On the New York Mercantile Exchange, May Crude raised $1.22, or 1.14 percent, to settle at $107.94 a barrel, highest close since ending at $108.02 on Sept. 25, 2008. The low was $106.30. Prices hit $108.47 in post-settlement trading, highest intraday price since $108.67, on Sept. 25, 2008. NYMEX Crude ended with a weekly gain of $2.54. Money managers raised their net-long Crude oil futures and options positions on the NYMEX in the week to March 29, the Commodity Futures Trading Commission said.
UPCOMING DATA/EVENTS
American Petroleum Institute oil inventory data at 4:30 p.m. EDT on Tuesday.
COPPER ENDS DOWN AMID EXTENDED CHINESE DEMAND LULL Copper ended lower on Friday, building upon the 2.4-percent loss recorded in the first quarter, as a lull in Chinese buying and a rising trend in inventories continued to reflect near-term demand weakness. Copper's losses at the start of the new quarter bucked the firmer tone in U.S. equities, which raced to their highest level since June 2008 after data showed a second straight month of solid gains in jobs and a slight drop in unemployment, which stood at two-year lows. Without an aggressive Chinese market presence, Copper's shorter-term prospects remained bleak. London Metal Exchange (LME) three-month Copper was untraded at the close and last bid at $9,359 a tonne versus Thursday's close at $9,430. COMEX May Copper shed 4.90 cents to settle at $4.2585 per lb. overnight, traders were met with Chinese purchasing managers' indices data, which showed a moderation in growth in the country's manufacturing sector. U.S. data later in the day showed manufacturing grew at a marginally slower pace in March as well, while construction spending fell to its lowest level since October 1999. Even as the upbeat U.S. jobs data signaled a decisive shift in the struggling labor market, it failed to alter investors' weary perception of Copper demand. Instead, investors have been focusing on the hefty supply builds in Chinese and London warehouses.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 6 percent from last Friday, the exchange said. LME Copper stocks fell by 1,000 tonnes on Thursday to 438,850 tonnes. Despite the withdrawal, inventories remain near their highest in eight months, having been on a steady climb since December.
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