Gold price continues hovering around 1000 in European morning but with a soft tone. Near-term outlook is mixed but the dollar remains a crucial determinant. USD recovers against the euro (currently trading at 1.459) after Germany's investor confidence missed expectation. The gauge rose to 57.7, compared with consensus of 59.9, in September from 56.1 a month ago.
In fact, recent decline of the dollar against major currencies looks excessive and a meaningful rebound is expected. If such a rebound materializes, gold price will be at risk. However, the themes such as improved risk appetite, interest rate differential and reserve diversifications away from USD remain in play. As long as these issues continue to be the focus of traders, it's hard for USD to rise high. If this is the case, downside pressure on gold will be alleviated.
GFMS remains bullish on gold price and forecasts it will reach 1050-1100 in 6 months, 'on balance, we're still favorably disposed towards the price in the medium term. That's mainly because we see it as highly likely that debt monetization and ultra-low interest rates, especially in the US, will at some point feed through to a build in inflationary pressures. Throw in dollar weakness and disappointment over conventional assets as the green shoots argument withers and then gold well over $1,000 becomes perfectly feasible'.
Crude oil price recovers to 69 as investors anticipate another week crude inventory draw in the US. The majority of analysts forecast the US Energy Department will report -2.5-3 mmb decline in crude oil stockpile in the week ended September 11 tomorrow. After market close, the industry-sponsored API will report its estimates which serve as a guide to oil supplies.
In Nigeria, the Movement for the Emancipation of the Niger Delta (MEND) said that it will end its 60-day cease fire today and threatened to resume attacks on oil facilities in the region. Since 2006, the rebel's attacks have reduced Nigeria's oil production by more than -20%. Potential supply destruction may help boost oil price in the near-term.
Energy prices have also gained support from US President Obama's comments that the nation's economy has been on the road to recovery and the job market is bottoming out. The market's focus today has turned to retail sales which should have risen +1.8% mom in August after falling -0.1% in the previous month. Auto sales were very strong last month as driven by the government's 'cash for clunkers' program. Moreover, retail gasoline sales, expected to have increased +5% during the month, should have contributed meaningful to the headline reading. The Empire State manufacturing index probably rose to 14 in September from 12.1 in the previous month. This represented the manufacturing in the New York district has expanded for the second consecutive month.