Metals and Energy Report Aug. 27, 2012

Gold recovered from early losses to close higher and returned to a four-month high, buoyed by hopes of fresh stimulus by global central banks and some renewed demand from ETF’s and rise in physical demand. Indian spot gold rose to a record high, tracking overnight gains in the global market while weaker rupee added further support, dampening demand for physical gold. India’s gold imports are set to fall further this year, as global bullion prices are driven higher by surplus cash in the market and by a weaker dollar, delegates at a major conference on the metal said on Friday.

A letter released on Friday from Chairman Bernanke to US Congressional Representative Issa, written just days ago, stated that the Feds, could and should do more to assist the economy and listed out their arsenal of weapons. Encouraging the markets that Mr. Bernanke would announce plans at his August 31st Jackson Hole address and action at the FOMC on September 13th.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,286.5 tons. Silver holdings of iShares silver trust, the largest ETF backed by the metal, increased to 9,820.81 tons, as on August 23.

A bid by some Republicans to return to the gold standard is unlikely because of a lack of international agreement on the matter and insufficient supply, according to the industry funded World Gold Council

German Chancellor Angela Merkel said after meeting with Greek Prime Minister Antonis Samaras in Berlin that Germany would not judge his country’s performance on its reform targets prematurely, but would await a report by the “troika” of international lenders due next month.

Chancellor Angela Merkel pledged to support the New Greek government as it struggles to reform its economy, saying the heavily indebted Greece must remain in the euro zone.

The metals pack weakened on poor eco data from China, after the HSBC PMI release showed that China was still falling and that a soft landing had not occurred. Although this offers more hope of stimulus the continued decline in global growth and manufacturing are weighing on the industrial metals

Copper futures eased slightly coming off one month highs, as hopes for more stimulus measures faded and on signs that Spain, the fourth-largest economy in the euro zone, could need sovereign aid soon.

Crude oil futures declined, following a trade journal report that the International Energy Agency may release strategic oil reserves as early as in September after dropping its resistance to a US-led plan. However, the threat to Gulf of Mexico oil production from Tropical Storm Isaac limited oil price major losses. Continued rumors of the release of the strategic reserves continued to grow over the weekend with no denials from the White House. A recent article suggests that the IEA which was originally against any release had changed its stance and now supports a release of the reserves if necessary to bring down prices.

Natural gas futures tumbled almost 4%, as high supplies and waning fears about Tropical Storm Isaac pushed prices to a nearly two-month low. The number of rigs actively exploring for oil and natural gas in the US declined by 16 this week to 1,898. 1,408 rigs were explored for oil, 486 were searching for gas while four were listed as miscellaneous, as per Houston-based oilfield services company Baker Hughes Inc. With all its up and downs for the week, Natural Gas ended trading on Friday when it had opened the previous Monday. 

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