Commodity prices continue to trade with strong momentum in European morning. RBA Governor Glenn Stevens' upbeat comments about economic outlook boosted optimism and the dollar index plunges to the lowest level in 2009. 'Risky assets' including stocks and commodities attracted capitals.
At the 'Challenges for Economic Policy' conference in Sydney, RBA Governor Glenn Stevens delivered a hawkish speech about the economic outlook. He said that economic recovery in Australia appears to be faster than expected and 'the downturn we are having may turn out not to be one of the more serious ones of the post-War era, in contrast to the experience of so many other countries'. The comments made investor very bullish on Australian dollar which rallies +1.2% to 0.833, the highest since September 2008. This has also pushed other commodity currencies higher with New Zealand dollar rising +0.9% to 0.6618 and Canadian dollar climbing to 1.08, the year-to-date peak level. The dollar index, on the other hand plummets to 78.3, the lowest since December 18.
Stock markets surged in Asia. The MSCI Asia Pacific Index jumps +1.3% with Hong Kong's Hang Seng Index, gaining +1.8% to 20625, one of the strongest performers amid speculations that rapid recovery in China's economy will result corporate earnings surprises.
In Europe, benchmark indices retreat after rising for almost 2 weeks. UK's FTSE 100 slide +0.25% to 4575 while Germany's DAX and France's CAC 40 drop +0.02% and +0.04%, respectively.
While price appears to be shy of 69 level, crude oil price continues to trade around 68. Bulls certainly want to push the black gold above 70. However, it seems the resistance there is rather strong. Moreover, current fundamentals do not support price to rise above that level.
Gold price gains modestly on USD' weakness. Currently trading at 958, the precious metal is expected to trade sideways. Silver price continues to rise higher after climbing +0.9% Monday. We believe silver can outperform gold should economic recovery accelerate.
The World Gold Council published a report on gold demand for 1Q09 last Friday. The biggest demand driver was investment demand which surged +36% qoq and +129% yoy during the quarter. However, both jewelry and industrial demand plunged on both quarterly and annual basis. The greatest contributor to the decline in jewelry demand was India. However, the drop was partly offset by increase in China. The Council anticipated the rise in Chinese consumption should be able to keep up in the second quarter.