WEEKLY BULLION REPORT-22 Sep To 27 Sep 2014

PRECIOUS METALS

GOLD

Gold fell, heading for a third straight weekly drop as the US dollar gained momentum as traders turned to higher yielding assets with Wall Street hitting new highs. Gold price was under pressure later as FOMC concluded its meeting without changing its forward guidance. At the same time, the projected Fed Fund rate path was substantially shifter higher (and even further away of current market expectations than before) which triggered modestly hawkish response in markets. Gold price therefore dropped to the lowest level since the beginning of 2014. Continuing normalization of Fed’s monetary policy should continue to be the key factor. Gold fell, heading for a third straight weekly drop, as the dollar was buoyed also by a decline in US jobless claims that reinforced the chance of a faster-than- expected tightening in US monetary policy, while stronger shares also weighed.The dollar rose 0.2 per cent against a basket of leading currencies after Thursday data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting a sharp slowdown in job growth in August was an aberration. The process of US monetary tightening continues and this will encourage further advances in long-term real yields and the US dollar.

SILVER

Gold fell 0.8 percent on Friday to its lowest price since January, and silver slumped 3 percent to a four-year low as the dollar surged on bets that U.S. interest rates could rise sooner than expected. Silver's drop was its biggest one-day drop since Dec. 12, 2013. Platinum fell to a fresh 2014 low while palladium also hit a three-month low. The dollar rose against a basket of currencies, on track for its 10th straight week of gains. The S&P 500 equities index rose to an intraday record high, as Alibaba Group Holding Ltd's shares surged in their first day of trading in what looks likely to be the largest IPO in history. Economic optimism has sapped gold's safe-haven appeal. U.S.economic activity rose less than expected in August, but was still consistent with a moderate expansion. The number of Americans filing new claims for unemployment benefits dropped more than expected last week, suggesting a sharp slowdown in job growth in August was an aberration and reinforcing the market’s view that US interest rates will climb earlier than had been expected.

ENERGY

CRUDE OIL

Crude Oil tumbled as IEA production numbers showing a growing global surplus as OPEC reviews production and demand levels. The oil price fell on Friday despite news that production in Libya dropped by about 200 thousand barrels per day due to fights between army and rebels. Sudden sharp increase in Libya’s oil production has many times in recent past proved only to be short-lived. The accelerated rise in global oil production could also influence OPEC policy and the cartel may even reduce its oil production quota in November. This could also curb any further significant price fall.

NATURAL GAS

Natural Gas pressurized from higher levels on Thursday. U.S. natural-gas inventories rose 90 billion cubic feet on the week ended Sept. 12, the Energy Information Administration said Thursday. Natural gas futures added to losses following the data. Cheniere Energy is boosting its investment in its Sabine Pass liquefied natural gas export facility in Cameron Parish by $6 billion to build two production units in addition to the four already under construction. The first of those units are expected to begin production in 2015. The final two units will begin production in 2019. Four years ago, Cheniere Energy announced the development of a natural gas liquefaction facility and export terminal to be built adjacent to Chenier’s existing LNG import receiving terminal in Cameron Parish. Construction began in August 2012. Nearly all the LNG production capacity for the first five liquefaction units has been sold under 20-year contracts with major global clients.

BASE METALS

COPPER

London copper was set to end the week flat on Friday as concerns simmered over the timing of a possible US rate hike, while signs of slowing growth in top metals user China also dragged. The number of Americans filing new claims for unemployment benefits dropped more than expected last week, suggesting a sharp slowdown in job growth in August was an aberration and reinforcing the market’s view that US interest rates will climb earlier than had been expected. Markets are looking to next week’s initial estimate of China’s manufacturing sector health in September for more clues on growth in the world’s No.2 economy. Media reports this week said China’s central bank would make available 500 billion yuan ($81 billion) in short-term funds through the country’s five biggest banks. The Chinese liquidity boost was short-lived and a stronger dollar made for lower prices. Worries that China’s economy may be slowing further intensified on Thursday as data showed home prices fell for the fourth straight month.

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