Gold remained firm although still trading below 1700. Statistics showed that physical demand for the yellow metal surprisingly soared in January. Normally, gold purchases soar in November on festive buying. The exceptional January spike should be driven by Indian consumers who increase purchases ahead of the tariff hike. Gold price is likely to rise further as central banks remain on accommodative modes with the BOJ accelerating its QE measures in January. Concerning the oil market, the EIA forecast that US total crude oil production averaged 6.4M bpd in 2012. The country’s supply would increase to 7.3M bpd this year and then to 7.9M bpd, the highest annual average level of production since 1988, in 2014. This suggests that production growth in the US has raised the uncertainty of the outlook of crude oil prices. At the same time, the rise in US oil supply may affect the logistics development that has planned to unlock crude from the US Midwest.
In the UK, the BOE minutes unveiled that policymakers voted 8-1 to leave the bond purchase plan unchanged at 375B pound. David Miles favored expanding the stimulus amid concerns that rise of the pound would be detrimental to economic growth. As mentioned in the minutes, "substantial headwinds to recovery remained, including the drag to activity from fiscal consolidation, a further squeeze in household real incomes, and the deterioration in UK competitiveness over the past couple of years" and "the sterling real exchange rate might be above the level compatible with the necessary rebalancing of the economy".
Separately, Prime Minister David Cameron has planned for a referendum by 2017, allowing the British people to decide whether the country should leave the European Union. At a speech today, Cameron stated that "fundamental questions" have been raised regarding the relation between the UK and the EU. According to him, "if we don’t address these challenges, the danger is that Europe will fail and the British people will drift towards the exit …I do not want that to happen. I want the European Union to be a success. And I want a relationship between Britain and the EU that keeps us in it."
On the dataflow, UK’s claimant count reported a -12.1K decline in December, down from a downwardly revised -8.9K a month ago. The ILO unemployment rate slid to 7.7% in the 3 months through November from 7.8% a month ago. The market had anticipated an unchanged rate of 7.8%. The Eurozone’s consumer confidence was probably revised higher to -26 in January from -26.5.
Oil and Gold Reports contributed by Oil N' Gold