Oil And Gold Analysis : January 31, 2013

CL3H

Crude oil futures rose in U.S. trading on Wednesday after investors digested U.S. fourth-quarter gross domestic product figures and concluded that the broader economy remains healthy despite an overall contraction. Rising inventories dampened spirits, however. The U.S. economy shrank in the fourth quarter though energy markets viewed the numbers with cautious approval. The Commerce Department reported earlier that the U.S. gross domestic product contracted for the first time since the second quarter of 2009 in the three months ending December, shrinking by 0.1%. Economists were forecasting growth of 1.1% after a 3.1% expansion in the preceding quarter. A 6.6% decline in government spending and a drop in private inventories contributed to the contraction, though the government added that consumer spending rose by 2.2% and business investment was 8.8% higher in the fourth quarter of last year, which was bullish for crude. Elsewhere, payroll processor ADP revealed that the U.S. private sector added 192,000 jobs in January, well above expectations for an increase of 165,000, which fueled gains, though supply data dampened spirits. The U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories rose by 5.9 million barrels in the week ended Jan. 25 compared to expectations for an increase of 2.58 million barrels. Total U.S. crude oil inventories stood at 369.1 million barrels as of last week. The report also showed that total motor gasoline inventories decreased by 1 million barrels, compared to expectations for a decline of 100,000 barrels.

GOLD

Gold prices rose on Wednesday after the U.S. announced the country's gross domestic product defied forecasts and contracted in the fourth quarter of 2012, fueling already growing expectations for the Federal Reserve to continue stimulating the U.S. economy. The Commerce Department reported earlier that the U.S. gross domestic product contracted for the first time since the second quarter of 2009 in the three months ending December, shrinking by 0.1%. Economists were forecasting growth of 1.1% after a 3.1% expansion in the preceding quarter, and the surprise fueled expectations that the Federal Reserve will continue with its USD85 billion monthly bond-buying program, a stimulus tool known as quantitative easing that weakens the dollar as a side effect. A 6.6% decline in government spending and a significant drop in private inventories contributed to the contraction, which came with several silver linings. The report added that consumer spending rose by 2.2% and business investment was 8.8% higher in the fourth quarter of last year. Elsewhere, payroll processor ADP revealed that the U.S. private sector added 192,000 jobs in January, well above expectations for an increase of 165,000. The combined news reports sent the dollar falling and the euro climbing, a recipe for climbing gold prices, as investors awaited the Federal Reserve's official announcement on monetary policy later Wednesday.