Comex gold price rallies to a new 2010-high at 1219.4, one more step closer to record high of 1227.5 made in December, as fears over sovereign crisis resurfaces. Moody's said it may cut Greece's rating to 'junk' in the coming month amid 'dismal' economic prospect. Silver also grinds higher to 18.6 while PGMs reverse gains.
Risk assets' massive relief rally loses steam as investors worry that the stability package may not be sufficient to contain European sovereign crisis. Market sentiment is further dampened after receiving strong Chinese inflation data as it signals more tightening. WTI crude oil price plunges to 75.6 in European session while Brent crude falls below 80 again.
Growth in China remained robust in April. Although industrial production missed market expectations and expanded +17.8% y/y, CPI soared +2.8% y/y, the fastest pace in 8 months. Despite the government's policy to curb lending, property prices rose +12.8% y/y while new lending also exceeded consensus and reached RMB 774B.
While the Chinese government aims to keep inflation at 3%, recent data shows that it's hard for this target to be achieved. Escalated inflationary pressure indicates more tightening measures are needed. It's likely the government will resume RMB appreciation soon, probably in June.
Crude oil imports rose to 21.17M tons in April. With exports remained sluggish, net imports reached a record high of 20.98M tons during the month. However, there are concerns that demand will slowdown as China accelerates tightening.
In its monthly report, OPEC upgraded its global demand forecast modestly. The organization controlling 40% of oil in the world expects demand will rise to 85.38M bpd in 2010 from 84.4M bpd last year. This was slightly higher than last month's forecast of 85.2M bpd. According to OPEC, China has been among the main drivers behind oil demand growth so far this year, which should continue for the rest of the year. On the supply side, non-OPEC supply will rise to 51.7M bpd, compared with 81.53M bpd projected in April. This signals less oil is needed from OPEC.
Demand/supply in oil market is again in focus and analysts anticipate US crude inventory rose +1.1 mmb in the week ended May 7 with Cushing stocks surging for another week. Gasoline and distillate stockpiles probably climbed +0.8 mmb and +1.3 mmb, respectively. American Petroleum Institute will release its estimates after market close today.