Commodities were mostly down yesterday as strong Chinese macroeconomic data spurred tightening speculations and robust US data strengthened the US dollar. The February WTI contract, which expired yesterday, plunged -2.2% to settle at 88.86. The contract for March delivery declined -2.4% to close at 89.59. The surprising increase in crude oil inventory also weighed on prices. Gold slumped as USD strengthened. The benchmark Comex contract tumbled to a 2-month low of 1342.4 before ending the day at 1346.5, down -1.73%. Encouraging US data signaled further QE measures are limited. These speculations pressured the metal.
Macroeconomic data released in the US were largely encouraging. Initial jobless claims fell to 404K in the week ended January 15 from 445K in the prior week. The market had anticipated a milder drop of 426K. Existing home sales jumped +12.8% to 5.28M in December while leading indicators eased to +1% in December, better than consensus of +0.7%. Although Philly Fed Index unexpectedly fell to 19.3 in January, compared with market forecast of a rise to 22.3, from 20.8 in December, investors chose to focus on sizable gains in 'new orders' and 'employment' components. However, strength in US data failed to alleviate worries about tightening in China. Indeed, stock markets recorded broad-based declines. DJIA and S&P 500 slipped -0.02% and -0.13% respectively. Europe's Stoxx600 dropped -1.17% while the MSCI Asia Pacific Index also slipped more than -1%.
The US dollar soared against major currencies as risk aversion increased. Investors fled to USD also because further QE measures may be limited as recent macroeconomic data signaled the country's economy continues to grow. Fed's QE measures have been weighing on USD due to its money-printing nature. Gold price surged to a record high of that time when the Fed announced QE2 in November, indicating the relationship between QE and gold. Gold price may be pressured further if there are more signs showing fewer QE measures are needed. Technically, gold price has pushed below the 100-day MA and the 20-day MA will pass below 50-day MA. These are bearish signals for price in the near-term.
There is lack of important US data today so that the focus will be on the Eurozone and the US. In the Eurozone, Germany's Ifo business climate probably rose to a new record high of 110.1 in January from 109.9 in the prior month. In the UK, retail sales might have contracted -0.3% m/m in December following at +0.3% gain in November.