Commodities regain grounds Thursday but upsides are likely limited as near-term outlook in the dollar remains strong and the result of the EU summit is uncertain. Crude oil price recovers to 80.97 in European session after sliding to 80.2. Natural gas changes little these few days and price has been hovering above 4 dollar. The market awaits the EIA's report on last week's gas storage change. The euro recovers as the ECB announced to keep the emergency collateral rules into 2011.
Gold price rebounds to 1094 but stays below both 50-day and 100-day average. Buying seems to have improved today but volume remains thin. Investors are expecting price to correct more.
The CFTC is considering regulating trading in precious metals and industrial metals after proposing limits to the energy market. Regulators hope position limits will expel speculators from the futures markets. However, the CME opposed the plan as it deemed it as not necessary and not useful. According to Tom LaSala, CME Managing Director, 'any effort to constrain trading on a U.S. exchange by the major firms that are large enough to hold positions near limits will simply push those firms from regulated and transparent market into the cash market or to a market beyond the regulatory jurisdiction of the CFTC'.
The weekly ECB statement showed that asset value of gold and gold receivables increased +1M euro in the week ended March 19, reflecting purchase of gold coin by one Eurosystem central bank. If the official sector turns into a net gold buyer from a net seller this year, it would strongly lift the sentiment and attract further funds flowing into the yellow metal.
In Asia, Bombay Bullion Association (BBA) said that India, the world's largest gold buyer, may import 23-28 metric tons of gold, compared with 4.8 tons in 2009. This indicates recovery in the country's gold demand. However, overall demand/supply outlook is not going to deviate significantly from last year. Gold's movement will hinge on the dollar's direction as well as investment flows.
Some updates on the Greek issue. German Chancellor Angela Merkel said she would recommend at the EU summit that a combination of IMF bilateral EU aid is offered to Greece as a measure of 'last resort'.
On the other hand, the ECB President Trichet announced to keep the emergency collateral rules into 2011. Under the current rule, the minimum credit threshold in the collateral framework has been lowered to investment grade level (BBB-). This is a kind of the ECB's contributing to the Greek crisis and indicates that policymakers have softened stance. In previous ECB meetings, Trichet had stressed that the central bank should not grant 'special treatment' to Greece and the ECB would not change its collateral rules for Greece.