Daily Commodities Analysis: Oil and Gold

Oil dropped to a three-week low after two European Union officials said an embargo on Iranian crude imports may be postponed for six months. It also declined after French Finance Minister Francois Baroin said Standard is stripping France of its AAA credit rating. Crude fell 0.4 percent as officials said that the ban would be delayed to allow nations to find new supply. International Atomic Energy Agency inspectors will go to Tehran to discuss Iran’s nuclear program. Rising tension between Iran and the West over the country’s nuclear development has spurred price increases in the past year. The U.S. and its European allies suspect Iran of using the program to create atomic weapons. The government in Tehran says the technology is for domestic power generation.  The Vienna-based IAEA, the United Nations’ nuclear watchdog, agreed to the meeting with Iranian government representatives to be held at the end of January, the diplomats said today on condition of anonymity because the negotiations are continuing.  Meanwhile, France credit rating cut AA+, Italy was cut two levels, to BBB+ from A, and Germany retained its AAA rating in the review of euro-area countries’ credit grades. The Institute of International Finance, the group representing Greece’s bank creditors, said talks with the government have paused for reflection after the discussions failed to produce a constructive consolidated response by all parties. The sovereign debt crisis began in Greece and then moved to Ireland, Portugal, Italy and Spain. Crude oil for February delivery fell 40 cents to $98.70 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 21. Oil dropped 2.8 percent this week and is up 8 percent from a year earlier.



GOLD

Gold traders are the most bullish in two months after mainland China imported the most metal ever from Hong Kong and investors bought U.S. bullion coins at the fastest pace in more than two years. Mainland China imported almost 102.8 metric tons in November, valued at about $5.4 billion, trade data on Jan. 11 showed. The Mint said it sold 85,500 ounces of American eagle gold coins in the first 12 days of January. Full-month sales would reach 213,750 ounces at that pace, the most since December 2009. China overtook India in the third quarter as the largest gold-jewelry market. The gain in imports from Hong Kong may be a sign the central bank is adding to reserves. The People’s Bank of China last made known its gold reserves of 1,054 tons more than two years ago. Gold is also benefiting from concern the euro zone will tumble back into recession. Germany, the region’s biggest economy, shrank roughly 0.25 percent in the fourth quarter from the third quarter. The rebound in gold is being threatened by a strengthening dollar which rose to a 15-month high against six major currencies last week. Gold prices could be due for a retracement next week after their sharp rally since late December, citing technical-chart considerations and late-week signs that the U.S. dollar may strengthen more against the euro. February gold raised $14 per ounce over the last week to settle at $1,630.80 on the Comex division of the New York Mercantile Exchange. The February gold contract ran up 9.1% from a Dec. 29 low of $1,523.90 to a high of $1,662.90 before pulling back, leaving a thought that there could be more of a correction ahead.