Monday 22 November 2010

Crude oil edges higher on Ireland bailout (Barcelona) - Reacting to the news that the Irish government formally applied for aid over the weekend, markets are beginning the week with improved risk appetite driving crude prices to the upside. The front-month crude contract currently trades at $82.67 a barrel, where it is nearly $0.50 higher since open.

The main driver of crude prices today is a weaker US dollar against the euro. The announcement of an Irish bailout is helping to ease concern in the common currency, which has weighed heavily in recent weeks. A weaker greenback against principle rivals makes crude, as well as other dollar-denominated commodities, less expensive and thus more competitive on international markets.

With little economic information of importance to be released today, commodity traders will continue to focus on the details of the Irish debt situation and speculate on the possibility of contagion to the other periphery nations.

US GOLD - Comex gold closes level as dip-buying pares earlier losses

New York 19/11/2010 - Gold on the Comex division of the New York Mercantile ended a volatile week on a muted note as bargain hunters placed a floor under prices and many investors sat out the day due to continued uncertainly over the Irish debt crisis.
Gold futures for December delivery closed Friday down 70 cents at $1,352.30 an ounce. The yellow metal was down about 1 percent for the week.
"There's plenty of market fatigue plus there's some lack of knowledge by market participants about exactly what is going to come out of this Ireland bailout. That, along with the amount of volatility we've had, is pushing some people to the sidelines," Sterling Smith, an analyst with Country Hedging, said.
It now appears that Ireland, whose banking system has been badly damaged by the collapse of the housing market, will likely seek a bailout from the European Union after initially dismissing the idea; however, the shape and size of the package is still unclear.
Nevertheless, a more positive tone out of Ireland led the euro to gain modestly to 1.3678 against the dollar, up from 1.3635 Thursday.
But even a resolution to Ireland's problems doesn't spell the end of Europe's sovereign-debt issues.
"Once you open up the bailout barrel, everyone is going to line up to ask for theirs. Credit default swaps on Portugal, Spain and Italy all moved up overnight, which shows that the market is starting to appraise more risk in those countries," Smith said.
Gold reached its intraday low of $1,342.50 in the early morning hours soon after China announced that banks there will have to put up 0.5 percent more in reserve requirements in a bid to combat inflation. Commodities traders worry that a change in the bank reserve ratio will make it more difficult obtain hard assets.
However, gold was able to recover most of those losses later in the session as end of the week bargain hunters emerged in the marketplace.
"There was definitely some buying on dips, which is indicative that the market is going to turn bullish, but I don't think anyone wants to be too aggressive in front of a short week," Smith said.
MKS Finance SA said in a note that gold's near-term trajectory is still quite cloudy.
"While a deeper correction shouldn't be ruled out, with gold falling as low as $1,250 as year-end approaches, ongoing uncertainty created by euro-zone debt issues and another round of quantitative easing in the US are expected to continue to attract buyers to the perceived safe-haven asset," MKS said.
In the other precious metals, Comex silver for December delivery closed up 34.5 cents at $27.179 an ounce.
Platinum for January delivery on the Nymex was up $23 at $1,663.90 an ounce, while December palladium settled up $7.95 at $695.50 an ounce.

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