Sharp fall in crude oil price stabilizes in European morning as driven by recovery in stock markets and mildly better-than-expected economic data in the Eurozone. Currently trading at 64, the black gold will likely consolidate for several days before decline resumes.
Economic confidence in the 16-nation Eurozone rose to 76 in July, better than consensus of 75.1 and 73.2 in the prior month. All components including consumer, industrial and services confidence showed improved from May. In Germany, unemployment rate stayed at 8.3% in July, slightly better than market expectation of 8.4%.
Stock markets edge higher in Europe. UK's FTSE 100 Index gains +0.8% to 4594. Germany' DAX and France's CAC 40 also add +0.7% and +1.1% to 5307 and 3403, respectively. Earlier in Asia session, the MSCI Asia Pacific Index climbed +0.7% as most Asian stocks rebounded after the decline Wednesday.
In Japan, Nikkei 225 Stock Average surged +0.5% to 10165, the highest level since October 6 as driven by earnings surprises from Honda Motor and Nissan Motor. Both stock rallied more than +7% today.
Gold futures recovers after plunging for 2 consecutive days and is currently hovering around 930 level. USD drops against major currency. Against the pound, the greenback slides almost -1% to 1.62 after Nationwide Building Society's report showed that the average house price in the UK rose +1.3% in July following a +1% increase in the previous month.
Gold price has been moving within a broad range of 860 and 990 after reaching a peak in February. During the period, investment demand also has lost momentum as capitals have been found flowing out of the yellow metal. We believe investors' loss of interest in gold investment was due to its great reduction in volatility.
The chart below shows gold price in various currencies and sideways trading is observed after the greatly volatile period in 1Q09. Moreover, statistics indicates that volatility of gold price denominated in USD (60-day standard deviation) has reduced to 17.5 as of July 29, compared with over 57 in February. Volatility of gold price denominated in euro, franc and pound were reduced to 10, 15 and 15 from corresponding 2009 peaks of 58, 80 and 49.