Gold prices remained under the $910 resistance level during overnight trading in Asia but did not dip under the $900 mark either, as the special OPEC meeting came to a close. A slump in German business sentiment looked set to complicate the ECB plan to raise rates next month and gave the US dollar a boost, lifting it to 73.50 on the index this morning. Gold's decline towards the sub $900 area based on the stronger dollar was offset by still rising oil prices following Nigerian production sabotage problems.
New York gold trading opened barely on the plus side today, showing a $0.40 gain, but with plenty of nerves visible in the floor sentiment as a busy week lies ahead. Judging by the background picture, gold still looks poised to head back towards $875 (or lower) as currency and oil trends do not stack up in its favor. Invesment demand will remain the key but will certainly be at the mercy of developments in other markets rather than showing internal momentum.
While today's economic calendar only offers retail sales and consumer sentiment, the coming days will contain plenty of market-moving data to satisfy any speculator worth his salt. Topping the list is tomorrow's Fed meeting, of course. We will however, also hear from Mr.T over at the ECB and there is still plenty of position jockeying left to do in the oil pits following the OPEC summit and its outcome as well as US hearings on the state of the market. Silver fell 8 cents to $17.24 but the noble metals showed a mixed picture with platinum losing $1 to $2050 while oladium rose $2 to $473 per ounce.
Well, the Jeddah OPEC hand-wringing session concluded with Saudi pledges of output hikes of 200,000 barrels per day (to a level of 9.7 million per day - a level not seen in decades) and with an outline of plans to boost oil production to 12.5 million barrels per day by the end of next year. Under normal circumstance, such supply increase news would have been able to temper the still red-hot price of black gold, however escalating tensions between Israel and Iran and the latest MEND attack on Nigerian oil installations offset the communique from Jeddah and kept oil on the boil as the week got underway.
Ironically, the Nigerian rebels announced a halt to their string of sabotages as of tomorrow, while staging one last one (evidently, for good measure). We bring you now the highlights of findings and posturing from the OPEC gathering but will let you decide what's next in store for the commodity. If nothing else, the sector is under a major magnifying glass right about now:
Both oil-producing nations and consumers now agree that petroleum is too costly and that the high prices are doing serious economic damage. This, according to UK Prime Minister Gordon Brown at a meeting of energy-policy makers in Jeddah, Saudi Arabia.
The meeting was called to discuss ways to bring down oil prices. The producing countries claim that speculators are at fault for the price surge while consuming nations say supplies are insufficient to meet demand, reports say. Saudi King Abdullah opened the Sunday summit, attended by some three dozen countries and almost two dozen oil companies, the Associated Press reported.
The call in the summit's final communique came amid accusations by oil producers that speculators are playing a key role in the spectacular rise in oil prices to almost 140 dollars a barrel over the past year. Leaders and ministers from the 36 nations said that the transparency and regulation of financial markets should be improved through measures to capture more data on index fund activity and to examine cross-exchange interactions in the crude market.
The high oil prices have stoked global inflation and prompted riots in some countries. The U.S. and other countries have been pressing the Saudis to boost production; before the summit, Brodman was quoted by news services as saying that producers must pump more oil to push prices down. The Saudis have raised output but have said that speculators, not supply shortages, are responsible for the price surge.
Saudi Oil Minister Ali al-Nuaimi said on Sunday that his country will invest massively to be able to produce 15 million barrels a day.
The world has enough petroleum reserves, both conventional and non-conventional, to meet oil demand for many, many decades to come, Nuaimi told a summit in Jeddah of top consumers and producers. Concerns over long-term supply shortages seem to be playing a role in strong futures prices, though I believe these concerns are badly misplaced, Nuaimi added.
All right, so if we are not about to squeeze the last drop of dino juice out of the deserts of the Middle East, then what is going on with these prices? Here are the latest findings (corroborated by the fingers that are being pointed by the producers), courtesy of the US Congress and its research:
Speculators now account for about 70% of all benchmark crude-oil trading on the New York Mercantile Exchange, up from 37% in 2000, according to congressional findings cited in a Wall Street Journal report Monday.
The report comes ahead of a House oversight subcommittee hearing slated for later Monday on Capitol Hill to study the role of financial investors in the crude futures market. There has been much discussion recently about how big a role so-called speculators have been playing in the sharp rise in energy prices, though no consensus has emerged on this point.
Congress, however, has grown increasingly concerned over speculative investors' role in the energy market in comparison with those buying futures contracts to hedge against risk from price changes. Lawmakers are expected to consider legislation to set strict limits -- or in some cases, an outright ban -- on speculative trading in energy futures in some markets, the Journal reported.
Rep. John Dingell, D-Mich., is looking into any legal loopholes that may have contributed to speculation in energy markets, the report said, citing unnamed people familiar with the matter. In 1991, according to documents provided by the agency to the committee's investigators, the Commodity Futures Trading Commission authorized the first exemption from position limits for swap dealers with no physical commodity exposure, the report said. This began what Dingell said was a process that has enabled investment banks to accumulate enormous positions in commodity markets, according to the report.
In a letter to the CFTC last week, Dingell asked the agency to disclose how many other exemptions it has provided over the years, the Journal said.
PS- Flash update- Within 20 minutes of opening virtually unchanged, gold caved in a major way on Monday morning, losing $25 as fund selling hit the floor of the exchange. Silver dropped an equally impressive 76 cents to $16.50 while platinum lost $18 at $2033. Gold bullion more than wiped out all of last week's gains in just minutes, after the dollar tacked on another .10 gain to 73.60 and oil headed lower. Welcome to the volatile world of commodities trading. No, it's not the 'nine o'clock whack' but the 8:30 unwind.