Archive for January, 2011

January 3, 2011

>Gold hits 10th annual gain; silver outperforms in 2010

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(Reuters) – Gold rose to within $10 of a record high on Friday, closing out an unprecedented tenth annual gain as the combination of a weaker dollar and global economic uncertainty seemed to pave the way higher next year.

The entire precious metals complex had a stellar run in 2010, led by palladium’s 97 percent rise, in a broad commodities rally that pushed the 19-commodity Reuters-Jefferies CRB index .CRB up 15 percent.

Spot silver, too, swept higher for an 83 percent gain on the year, as investors sought the white metal as an alternative to gold. It was the best-performing assets in the CRB, hitting a 30-year peak of $30.92 on Friday.

Spot gold moved up to $1,418.85 an ounce by 2:22 EST, up 1.06 percent from the previous close at $1,403.99, and a 29.4 percent advance over 2009. Bullion prices were on track for their fifth straight month of gains, the longest stretch of monthly increases since late 2001.

U.S. February gold futures settled 2010 at $1,421.40 an ounce, up $15.50, or 1.1 percent, and marked a 29.7 percent gain over 2009’s settlement when the active gold contract ended at $1,096.2 on the COMEX division of the NYMEX.

Friday’s gains were spurred by the dollar’s broad decline against a basket of currencies .DXY, as investors closed their books on 2010. But the U.S. currency still managed to end a volatile year a bit firmer.

“The gold price remains well supported by a weaker dollar and solid investment demand,” said Anne-Laure Tremblay, precious metals strategist at BNP Paribas.

“We expect the gold price rally to continue into 2011 on the back of strong fundamentals, including inflationary pressures (notably in China), ample liquidity and concerns about the value of the dollar,” she added.

Traders and analysts expect gold to break above $1,500 in 2011, particularly if the dollar extends its decline, the U.S. economy remains unable to generate enough jobs to lower unemployment and Europe’s debt crisis is not diffused.

“As for next year, I’m thinking gold could trade firmly over the next quarter or two. And then have the potential to see some weakness in the second half of the year,” said Tom Pawlicki, precious metals analyst at MF Global in Chicago.

He said he thinks gold investors will remain focused on sovereign debt issues, and Chinese and central bank buying of gold, along with quantitative easing enhancing gold’s luster.

But eventually those issues will get played out, he added and an increase in the negative real yields that have been benefited gold in 2010 could work against precious metals plays in 2011 as economic growth begins to pick up.

“If short-term yields start rising because the economy gets better or because monetary policy gets normalized that may take away that negative yield argument for holding gold and add pressure later in the year,” said Pawlicki.

Also tempering some of the enthusiasm, holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell to 1,280.722 tonnes by Dec 30, its lowest since early June.

Spot palladium surged to a nine-year high at $799.47 an ounce, and platinum, at $1,766.24, was up 20 percent on the year.

(Additional reporting by Rujun Shen in Singapore; editing by Keiron Henderson and Sofina Mirza-Reid)

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January 3, 2011

>Commodities Surge

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Reuters) – Oil prices hit a 26-month high over $92 a barrel on Friday, closing the year up 15 percent on expectations that the economic recovery will drive demand growth next year and send prices into triple digits.

Strong growth from Asia, especially China, and a rebound in demand from recovering economies elsewhere fueled a four-month rally that knocked crude over the $70-$80 range it held for much of the year.

U.S. crude oil futures surged to a 2010 high on Friday, settling up $1.54 a barrel at $91.38 a barrel, after touching $92.06, the highest level since October 7, 2008. The settlement marked the largest end-year price since 2007.

London Brent gained $1.66 to settle at $94.75 a barrel, its highest end-December settlement since 2007 and up nearly 22 percent on the year.

Global output jumped 2.2 million barrels per day (bpd), according to a Reuters poll, the biggest increase since 2004, and another healthy 1.5 million bpd gain is forecast for next year.

While many experts say oil could break $100 a barrel in the new year, they don’t expect a surge to levels near $150 seen in 2008, when crude first broke into triple digits.

The Organization of the Petroleum Exporting Countries would step in to cool off markets if they headed into territory that could endanger the global economic recovery, analysts

said.

“At some point, I would expect OPEC to increase production, whether through an extra cargo here or there to cash in on high prices or whether by a more concerted effort to calm people down,” said Tim Evans, analyst for Citi Futures Perspective.

Recent gains in the dollar could also help cap oil’s momentum by increasing the cost of dollar-denominated currencies for holders of other currencies.

U.S. crude averaged $79.61 a barrel for the year, second only to 2008’s record $99.75. Crude shot to a high of $147 a barrel in July of that year, before the global recession hit demand and sent prices below $33.

Cold weather in the United States and Europe and OPEC’s decision to keep production levels steady earlier this month have added to bullish sentiment this month. Analysts are watching to see how much of the recent rally has been caused by seasonal weather demand and how much has been driven by more structural consumption

growth.

Speculators betting the economic recovery will boost demand have poured into oil markets, with net long positions held by money managers in U.S. oil futures hitting fresh records in December.

U.S. crude rallied back from early losses on Friday in light holiday trade of about 275,000 contracts — about half the level seen over the past 30 days — bouncing off lows near $89 a barrel.

“We’re seeing exaggerated price swings because of low volume of trade but there is technical support around $89 a barrel and the rally will continue to march into next year,” said Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.

(Additional reporting by Jeffrey Kerr in New York, Randi Fabi in Singapore and Dmitry Zhdannikov in London; Writing by Matthew Robinson; Editing by Lisa Shumaker)