Oil And Gold Analysis: September 27, 2013

Bottom fishers snapped up nicely priced crude oil futures on Thursday, shrugging off bearish pressures such as soft U.S. data and waning fears of a military conflict in the Middle East. U.S. fiscal uncertainty, soft data and waning fears of war in the Middle East pushed prices down to levels ripe for bottom fishing on Thursday. Congressional Republicans and Democrats worked to craft a budget proposal to avoid an October partial government shutdown. Also on Thursday, official data showed that the U.S. economy expanded by 2.5% in the second quarter, just shy of expectations for a 2.6% expansion. Pushing the oil up higher, however, were better-than-expected numbers out of the labor market. The U.S. Department of Labor said that the number of individuals filing for initial jobless claims in the week ending Sept. 20 fell by 5,000 to a seasonally adjusted 305,000, from a downwardly revised 310,000 the previous week. Analysts were expecting the figure to rise to 325,000. The numbers boosted spirits in energy markets by painting a picture of a more robust U.S. economy that will demand more fuel and energy going forward. Capping gains, however, were expectations that a more robust economy will prompt the Federal Reserve to begin tapering the pace of its monthly bond purchases soon. Asset purchases weaken the greenback by driving down interest rates to spur recovery, which makes oil an attractive buy.



GOLD
Gold prices fell on Thursday after better-than-expected data out of the U.S. labor market rekindled expectations for the Federal Reserve to begin tapering the pace of its $85 billion in monthly asset purchases, which weaken the dollar to spur recovery. The U.S. Department of Labor reported earlier that the number of individuals filing for initial jobless claims in the week ending Sept. 20 fell by 5,000 to a seasonally adjusted 305,000 from a downwardly revised 310,000 the previous week. Analysts were expecting the figure to rise to 325,000, and the better-than-expected report fueled expectations that a more robust U.S. economy will prompt the Federal Reserve to begin tapering the pace of its monthly bond purchases soon. Asset purchases weaken the greenback by driving down interest rates to spur recovery, which makes gold an attractive hedge. Still, softer-than-expected data out of the U.S. housing market capped gold's gains by keeping expectations going that the Fed will very gradually wind down stimulus programs and won't tighten policy any time in the near future. Industry data released earlier showed that U.S. pending home sales dropped 1.6% in August, more than an expected 1.0% decline following a downwardly revised 1.4% contraction the previous month.