Gold Tumbles as Euro Declines on Greece's Default Worries

on May 09 2012 3:16 AM

Financial markets slumped amid European sovereign debt crisis concerns. The newly elected Greek government has to decide whether, and how, to repay interests of bonds due on May 15. Gold tumbled, inline with the euro, amid worries of Greek default. The benchmark comex contract of the yellow metal plunged to a 4-month low of 1595.5 before ending the day at 1604.5, down -2.11%. Prices remained under pressure in Asian trading Wednesday. Crude oil remained weak with the front-month contract for WTI and Brent crude losing -0.95% and -0.38% respectively.

Greek default risks increased once again as the debt-laden country has to repay the 436-M euro due on a floating rate note issues 10 years ago. Otherwise, it will have to default. This, together with the huge uncertainty in the new government with all 3 parties having the difficulty in forming a coalition government and a reelection is likely, has raised the chance of the Greece-exit from the Eurozone. These worries have led the declines in the stock markets and especially the euro.

The dataflow was light yesterday. In the US, investors were pleased by the encouraging JOLS report which indicated that the number of job openings in March rose to 3.74M, the biggest number since July 2008. This helped eased market concerns after the disappointed employment report released in the week before.

Concerning the US oil inventory, the industry-sponsored API estimated crude stock added +7.8 mmb in the week ended May 4. Gasoline and distillate, however, dropped -4.96 mmb and -2.70 mmb respectively. The DOE/EIA probably reports a +2.2 mmb increase in crude inventory while gasoline might show a slip of -0.6 mmb. Distillate stock is expected to stay unhanged.

Weekly change in inventory as of 04/05/11
Change
Consensus
Previous

Crude oil
 
+2.20 mmb
+2.84 mmb

Gasoline
 
-0.60 mmb
-2.01 mmb

Distillate
 
+/- 0 mmb
-1.90 mmb

Comparison between API and EIA reports:

       

 
 
API (May 4)
 
 
EIA (May 4)
 

 
Actual
Inventory
Previous
 
Forecast (using API's inventory level)
Inventory

Crude oil
+7.80 mmb
378.19 mmb
+2.04 mmb
 
+2.32 mmb
378mmb

Gasoline
-4.96 mmb
207.91 mmb
-3.90 mmb
 
-1.81 mmb
208 mmb

Distillate
-2.70 mmb
121.88 mmb
-4.20 mmb
 
-2.15 mmb
122 mmb

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