Despite thin trading ahead of long holiday, crude oil price's near-term outlook remains strong. Currently trading at 77.2, the February contract is hovering around the highest level in 3 weeks. After plummeting to as low as 68.59 on December 14, the black gold has rebounded steadily as inventory levels from developed economies declined, showing signs of demand recovery. However, we are yet to confirm if crude oil has resumed the rise from 33.2 (January 2009) until price can trade sustainably above 80. On monthly basis, December will be a volatile month but actual gain or loss will be minimal.
Natural gas soars for the third consecutive day and has gained +1.4% so far this week. The market sentiment has turned after gas inventory dropped in the past 2 weeks. Later today, the US Energy Department will probably report that gas storage declined -171 bcf to 3395 bcf in the week ended December 18.
Gold rises above 1100 for the first time in 2 days as USD retreats. After climbing +0.7% to 1094 Wednesday, the benchmark contract for the yellow metal extends gains to 1106 in European session today. However, it will probably record loss for a 4th consecutive week, indicating correction of recent rally to record high at 1227.5 (December 3) is still underway. After breaking above 2008-high at 1033.9 in October, rally in gold futures accelerated. Propelled by aggressive Asian central bank purchases in November, the precious metal surged +15% during the month. The 2 months' relentless rally had brought gold to overbought territory. At the same time, strong US non-farm payrolls that spurred speculations of earlier Fed rate hike as well as sovereignty risks in Dubai and Greece triggered buying in USD. These factors were prominent reasons for gold's sharp selloff in December.
Medium-term (1-3 months) outlook for gold remains dependent on the dollar's movement. If payrolls in December surprise the market to the upside, the dollar will likely move higher. This is negative for gold.
Data to watch today include jobless claims and durable goods orders in the US. In the week ended December 19, initial jobless claims probably dropped -10K to 470K while continuing claims are expected to have declined -100K to below 5.1M. Recent jobless claims data have suggested stabilization in the job market.
Moreover, durable goods orders should have risen +0.4% mom in November after falling sharply in October. Excluding transportation, the growth should even be higher (consensus: +1%) as Boeing reported only 9 orders in November, compared with 14 units a month ago.