Oil and Gold: February 2, 2012

Oil declined to a six-week low after the Energy Department reported U.S. inventories climbed more than expected and gasoline demand tumbled to a 10-year low.  Futures dropped 0.9 percent after supplies rose 4.18 million barrels to 338.9 million last week. A 2.6 million-barrel gain was forecast in a Bloomberg News survey. Gasoline consumption slipped to 7.97 million barrels a day. “The tone is turning bearish,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “We continue to get bearish reports week after week and the market has been able to hold on. It looks like that is about to end.” Crude oil for March delivery fell 87 cents to $97.61 a barrel on the New York Mercantile Exchange, the lowest settlement since Dec. 20. The price has increased 7.5 percent in the past year. Brent crude oil for March settlement climbed 58 cents, or 0.5 percent, to end the session at $111.56 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures widened to $13.95, the most since Nov. 11. Brent traded at a record $27.88 more than WTI on Oct. 14. “If we can move below the $97.50 area there’s nothing stopping us until $92.50,” Mesh said. The intraday low of $92.52 on Dec. 16 is the lowest price since Nov. 3. Gasoline demand declined 1.6 percent to the lowest level since the week ended Sept. 21, 2001, the report showed. Total fuel consumption dropped 8.3 percent to 17.7 million barrels a day, the least since 1999.



GOLD

Gold futures in New York climbed to the highest price in almost eight weeks as Europe’s lingering debt crisis and a weaker dollar spurred demand for the precious metal as an alternative asset.  The dollar fell as much as 0.8 percent against a basket of six currencies. Gold jumped 11 percent last month, the biggest January gain since 1983, on mounting concern that Europe’s debt woes may lead to a recession, and after the Federal Reserve pledged to keep its benchmark U.S. interest rate low until at least late 2014 to spur growth. “Gold is trading like a hard currency,” James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in an e-mail. “People are worried about currency debasement because of the credit easing by several countries.”Bullion may reach $2,000 by the fourth quarter, up from a first-quarter estimate of $1,850, analysts at Bank of America Merrill Lynch said today in an e-mailed report.  Gold climbed 10 percent in 2011, an 11th consecutive annual gain, reaching a record $1,923.70 in September, as investors sought to diversify from equities and some currencies.