Oil And Gold Analysis: May 20, 2013

New York-traded crude oil futures ended Friday’s session at a one-week high, after data showed that U.S. consumer sentiment rose more than expected in May, climbing to an almost six year high. Gains were limited as the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, rose 0.5% on Friday to settle the week at 84.34, the strongest level since July 2010. A stronger dollar makes U.S. commodities more expensive for importers holding other currencies. The dollar was boosted amid growing expectations the Federal Reserve will wind down its stimulus program, amid indications of an improving U.S. economic outlook. The Fed is currently running a USD85 billion monthly asset-purchasing program, which weakens the greenback to spur recovery. In the week ahead, oil traders will be focusing on Wednesday’s Federal Reserve minutes, as well as testimony on the economic outlook and monetary policy by Fed Chairman Ben Bernanke. Markets will also be awaiting the release of key euro zone data on manufacturing and service sector activity.

GOLD
Gold futures declined for the seventh consecutive session on Friday, tumbling to a one-month low as investors continued to speculate over an earlier-than-expected end to the Federal Reserve’s quantitative easing program. Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its bond-buying program sooner-than-expected. Some chart-based selling also weighed after prices broke below key support levels, triggering a flurry of automatic sell orders. On the week, gold futures lost 6.1%, the second consecutive weekly decline. Gold prices struggled due to a broadly stronger U.S. dollar, as dollar-priced commodities become more expensive to investors holding other currencies when the greenback gains. Sentiment on the precious metal was further dampened after quarterly financial filings released earlier in the week showed that hedge fund billionaire George Soros cut his holdings of gold-backed exchange-traded products in the first quarter. Funds run by Blackrock and Northern Trust also showed reductions, underlining concerns that investment demand is fading as U.S. stock markers rally to all-time highs. In the week ahead, gold traders will be focusing on Wednesday’s Federal Reserve minutes, as well as testimony on the economic outlook and monetary policy by Fed Chairman Ben Bernanke.