WTI crude oil price fell from a 2-week high in European session as Hurricane Irene has done less damage on oil infrastructure than previously expected. As pipelines, terminals and refineries did not seem to get hurt by the storm, oil production should remain intact. Gold price changed little at 1785/1800 level. Price may gain supports and rise as Indians extend purchases during the festive season.
Indian festivals are clustered in the second half of the year: Eid this month, Diwali in October and the wedding season later in the year. The chart below shows that gold performed better in the second half of a year over the past 30 years. This might be helped by the festive season in India. Rajesh Exports, India's biggest jewelry maker, expected that gold buying (jewelry, coins, bars and medallions) may rise to 250 metric tons in the 3 months ending November 30, up +25% from the same period last year. Elevated gold prices have not dented investors' interest in the yellow metal.
The global economic outlook does not go as strong as what recent price movements have suggested. Christine Lagarde, the new managing director of the IMF, warned that the world economy is in a 'dangerous new phase' and we are at risk of 'seeing the fragile recovery derailed'. The IMF revised lowered its economic forecasts. The world GDP will probably grow +4.2% in 2011, down from June's estimate of +4.3%, and +4.3% in 2012, down from 4.5% projected previously. Most of the expansion will be driven by emerging markets as downside risks growth in advanced economies are increasing. In the US, GDP growth is trimmed to +1.6% for 2011 and +2% for 2012 from ++2.5% and +2.7% respectively. The fund also revised down Eurozone's growth rates to +1.9% for 2011 and +0.4% for 2012 from +2% and +1.7% respectively.
Eurozone's confidence deteriorated sharply in August. With exception of consumer confidence, all other indices fell much more than the market had anticipated. Consumer confidence dropped to -16.5 (consensus: -16.6) in August from a revised -11 in July. Economic confidence slipped to 98.3 while July's reading was revised lower to 103. Industrial confidence fell into the negative territory (-2.9) in August while the reading in July was revised down to 1. Services confidence dropped to 3.7, more than halving July's 7.9. In the US, the S&P/Case-Shiller Composite-20 Index probably contracted -4.9% y/y in June after declining -4.5% a month ago. Consumer confidence in the country might have dipped -7 points to 52.5 in August. The Fed will also released minutes for the August FOMC meeting today.