Precious metals traded steady underpinned by a weakening US dollar index. US dollar fell against other major currencies, after US Federal Reserve stated that it could keep interest rates at ultra-low levels until late 2014.
Federal Reserve has also kept its long term inflation target as low as 2%. Euro continued to trade firm, garnering strength from successful Italian bond auction. Italian bond yields fell to 1.97% after the country sold 8bn euros worth of six-month t-bills, the lowest level since May and down from 3.25% achieved at the previous sale.
EU leaders will sign off on a permanent rescue fund for the euro zone at a summit today and are expected to agree on a balanced budget rule in national legislation.
LME base metals witnessed marginal downward correction, as soft US economic growth numbers led to profit booking in the base metals complex. US Q4 GDP was reported at 2.8%, lower than the market expectations of 3%.
However, the number was much better than the Q3 growth figure of 1.8%. Encouraging signals from the US Fed in respect with the low interest rates as well as a strong probability of stimulus packages continued to restrict the downside in the metals pack.
On Copper front, declining copper stockpiles in LME monitored warehouses since the past couple of weeks continued to cast positive picture on the demand side.
US Crude Oil futures witnessed moderate downside due to lower than expected US GDP growth numbers during the Q4. However, supply concerns in the Middle East continued to limit the downside in the energy complex.
Iran has now vowed to stop oil exports to some countries and consequently speculation is rife that Iran may impose a 5-10 year embargo on its oil exports to EU. To resolve the growing rift between Iran and West, IAEA inspection delegation will try to advance efforts to resolve a row about the nuclear work which Iran says is purely civilian but the West suspects is aimed at seeking a nuclear weapon.
On a broader perspective, while short term fundamentals including the prevailing middle east tensions continue to indicate a high volatility while long term economic concerns impose a strict resistance to breach US$100/bbl.
Courtesy: IIFL
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