Metals, Crude Sharply Higher as AUD, NZD Soar

as Brent futures traded as high as $109.41 and WTI futures tested $107.03. Oil appreciated after the American Petroleum Institute reported inventories declined by about 1 million barrels to 365.3 million barrels for the week ending 9 August, and the U.S. Energy Department reported supplied dwindled by 2.8 million barrels, suggesting demand may be stronger than expected. The weaker U.S. Dollar also aided Oil’s gains.

Gold increased sharply to its highest level in nearly three weeks as investors chased the metal higher on the heels of a weakening U.S. Dollar. Traders shook off a report showing that major Gold investor John Paulson reduced his holdings in the SPDR Gold Trust by 53% in Q2. Assets in SPDR Gold Trust, the world’s largest Gold bullion-backed exchange-traded product, reached 913.23 metric tons but remain off some 32% in 2013, erasing US$ 33.4 billion of its value. Similarly, legendary investor George Soros also liquidated his entire position in SPDR Gold Trust in the three months to June. China’s demand for Gold moved higher with volume for Shanghai’s benchmark spot contract reaching 10,739 kgs yesterday, its highest level since 6 August. Gold appreciated 7.4% last month, its strongest showing since January 2012. The World Gold Council also reported global demand slipped 12% in Q2 to a four-year low at 856.3 metric tons despite a 71% increase in Indian consumer demand and an 87% climb in Chinese consumer demand, increases that were offset by a 57% y/y decline in central bank purchases.

Silver moved higher to an intraday high of $22.18, its seventh consecutive daily rise and strongest showing since late June when it reached its weakest level in nearly three years. Silver was helped by yesterday’s Eurozone GDP data that saw a return to economic growth in Q2, up +0.3% over the previous three months. Silver is about 28% weaker in 2013 as investors have reduced exposure to metals on fears the Chinese that Chinese economic output is moderating. Last week’s Chinese data, however, reported strong growth in imports and exports. Nearly 40% of silver consumption is linked to products including circuit boards and solar panels, meaning the price can closely track expectations for economic growth.

The Australian Dollar scored strong gains through the European session with AUD/USD higher to US$ 0.9182, EUR/AUD lower to A$1.4471, and AUD/JPY stronger to ¥89.98. August consumer inflation expectations moderated to +2.3% from +2.6% and RBA FX transactions slowed in July.

The New Zealand Dollar notched gains against all major rivals through the European session with NZD/USD higher to US$ 0.8084, EUR/NZD weaker to NZ$1.6428, and NZD/JPY tackling the ¥78.58 level. ANZ July job advertisements were up 3.5% m/m and the Business NZ July performance of manufacturing index climbed to 59.5 from 55.2. Also, ANZ August consumer inflations were up 2.7% m/m to 123.0.

The U.S. Dollar crashed against its major peers through the European session with EUR/USD stronger to US$ 1.3309, USD/JPY off to ¥97.57, GBP/USD testing US$ 1.5548, and USD/CHF lower to CHF 0.9311. Fed official Bullard said he is undecided on whether to support a taper in September of the Fed’s QE program, adding it is a “data dependent process.” Bullard also said he is unsure why inflation growth remains weak and noted clear improvements in the U.S. labour market. Data due in the U.S. today include July CPI (2.0% y/y forecast; 1.8% y/y prior), weekly initial jobless claims (335k forecast; 333k prior), August Empire manufacturing (9.46 prior), June TIC flows, July industrial production (0.3% forecast; 0.3% prior), July capacity utilisation (77.9% forecast; 77.8% prior), August NAHB housing market index (57 prior), and August Philadelphia Fed index (19.8 prior).