BULLION
Gold prices continue to trade in ranges and fell on the final trading day of last week, giving up gains from the previous session, as the European currency fell on Friday despite only seven banks out of 91 failed in the stress tests conducted by the regulators of the European Union. The market expectations were for 10 banks too fail with 2 from Germany, one from Greece and seven from Spain.
Capital short falls were expected to amount to 100 billion Euros, but capital shortfalls amounted to only 3 billion Euros. The European currency fell against the US dollar as the market remained a bit skeptical about the credibility of the stress tests that were conducted. The stress tests were also conducted only on the banks trading books and not their banking books.
However, better than expected German business sentiment, which climbed to the highest level in three years, remained to be supportive to the European currency. Gold futures for August delivery dropped $US7.80, or 0.7 per cent, to $US1, 187.80 on the Comex in New York. Gold holdings of SPDR, the largest gold-backed exchange traded fund, remained unchanged at 1302.05 metric tonnes as of July 23.
ENERGY
Crude oil prices had climbed towards a two month high on Friday last week as better than expected US Corporate earnings improved the sentiments in the market. However, long liquidations that emerged at highs, brought prices back. Oil prices were also boosted by a government forecast that a storm will continue on a course into the Gulf of Mexico towards the Louisiana coast through the weekend.
The strength in the US dollar following the bank stress results also persuaded prices to fall back on Friday. Light, sweet crude for September delivery recently traded 66 cents, or 0.8%, lower at $78.64 a barrel on the New York Mercantile Exchange.
Natural gas prices slid on Friday as a rise in US dollar after the bank stress results and profit booking, combined by rising supplies have limited the gains in the counter. Report from the Energy Department showed that supplies climbed 51 billion cubic feet in the week ended July 16.
The Energy department of US has estimated that inventories of natural gas will rise to 3.81 trillion cubic feet by the end of October. However, the cooling requirements in the US are expected to be 24 percent higher that normal through July 29, according to Weather Derivatives of Belton, Missouri. Also supporting prices is the hurricane threat at the US Gulf of Mexico. The National Hurricane Center of US said that hurricane ‘Bonnie’ was on a path that puts gas and oil production in the US Gulf in danger.
BASEMETALS
Improving demand prospects and falling inventories of copper, the bellwether of base metals, have supported the sentiments in the market, taking prices towards five week highs. The stocks monitored by the London Metal Exchange have dropped for 22 straight weeks, the longest slide since the year 2004. In addition, positive European economic data also helped prices to climb. However, falls in the European currency on Friday did put pressure on base metals prices.
