Gold price for April delivery trades narrowly above 930 today after plummeting to as low as 916 Wednesday. Inflationary pressure and dollar's outlooks are 2 major factors affecting gold price's movement. Since the Fed's announcement on debt purchase program last week, inflation expectation has been shot up again. The difference in yield between 10-year Treasury Inflation- Protected Securities (TIPS) and comparable securities, known as the breakeven rate has widened to 139.23 yesterday, compared with 123.82 last Friday.
However, speech by policymakers may damp such expectations. Janet Yellen, President of the San Francisco Federal Reserve Bank, said in an occasion that 'for some time to come, disinflation, and even deflation, will represent greater risks than inflation' as economy will remain sluggish 'for several more years'. The president added that while the US may not experience the kind of deflation happened in Japan in last decade, the government will need to monitor the situation and make preventions.
The market has vigorous debates after China's push for a global reserve currency. Some believed as G20's powers have been growing rapidly, china's proposal will receive serious consideration in next week's G20 summit. Others expect the US will not give up its reserve currency position and will not allow another other currency to compete for the USD's position.
Earlier this week, Zhou Xiaochuan, China's central bank governor urged the IMF to use its Special Drawing Rights to create a reserve super currency as the nation, which is holding US Treasury of $739.6B as of January (up from $535B in June 08), concerns about inflation and depreciation in USD. Special Drawing Rights refers to issuance of IMF's in-house reserve asset. On one hand, China this time looks very serious about putting the USD-ruling era to an end; on the other hand, other sources showed that the Chinese Government has sharply increased their holdings of US Treasuries over the past month. Therefore, the main purpose for Chinese Government's speech is not looking for a replacement of the dollar but to warn the US to take measures to guarantee its 'good credit'.
Platinum price surges to 6-month high at 1151.2 in European morning as rise in durable goods orders(Feb: +3.4%, consensus: -2%, January: -5.2%) in the US spurred speculations that auto demand will improve soon. 60% of application in platinum is in autocatalyst and a recovery in car making industry will definitely help platinum's price.
Natural gas price has gained 2.7% so far this week, clearly underperformed crude oil and others in the commodity complex, as supplies will likely increase after cold winter left us. Inventories of gas for the week ended Mar 20 probably fell 10 bcf, a draw that widened year-over year and 5-year average surplus by 26 bcf and 37 bcf, respectively.
Crude oil price continues to hold above 52.5 despite unexpected build in crude inventory as driven by rallies in stock markets. In Asia, the MSCI Asia Pacific Index gained 1.5% while Nikkei 225 Stock Average and Hong Kong's Hang Seng Index added 1.84% and 3.57% today as corporations' earnings results beat estimates. In European morning, UK's FTSE 100 opened slightly higher despite weaker-than-expected retail sales data which contracted -1.9% mom in February which annual gain came in at +0.4%, the smallest in 13 years.