Paul Ebeling on Gold, Silver, Oil NYSE:USO, NYSE:SLV, NYSE:USO

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SPDR Gold Trust ( ETF ), NYSE:GLD, iShares Silver Trust ( ETF ), NYSE:SLV, United States Oil Fund LP ( ETF ), NYSE:USO

Commodities started Y 2011 on a rocky path, as prices were set by the USD's strength and macro-economic developments. SPDR Gold Trust ( ETF ), NYSE:GLD, iShares Silver Trust ( ETF ), NYSE:SLV, United States Oil Fund LP ( ETF ), NYSE:USO

Earlier in the week, the US economic data released were encouraging, spurring speculations that the US Fed's Quantitative Easing (QE-2) measures might be limited this year.


US ISM manufacturing index added +0.4 points to 57 in December. While the reading was expected, strength from 'New Orders' and 'production' components boosted optimism on US recovery.

New Orders rose to 60.9 from 56.6 in November and production rose to 60.7 from 55 in November. The report set a positive tone for growth in manufacturing sector in the near-term.

ISM services index released on Thursday improved to 57.1 in December, consensus: 55.6, from 55 in the prior month.

The services sector represents around 90% of the US economy and the surge of the ISM reading to the higher level since May 2006 sent the market an indication that the US recovery is gathering momentum.

Gold and Silver

Gold price slumped last week as USD rallied. The benchmark Comex contract fell to as low as 1352.7 before settling at 1368.5, down -3.70% on the week. The impact of positive US economic data on Gold was easy to understand.

Improvement in US growth outlook reduces the need for the Fed to extend QE after the 600B+ asset-purchase program ends in June 2011.
Note: QE is money-printing in nature and triggers inflationary concerns in the long-term. One of the reasons that investors fled to gold last year was to hedge against inflation to be fueled by QE. If the need for further QE is diminished, demand for Gold will be lower and investors will prefer for higher-yield assets.

Gold recovered in NY session Friday after less-than-expected US payroll growth in December. The metal was also supported by US Fed Chairman Ben Bernanke's testimony before the US Senators. Bernanke said it could take "4 to 5 more yrs for the job market to normalize fully".
He went on to defend the asset-purchase program announced in November, saying that he believes it will spur employment and bolster the economic recovery.

The Fed Chairman made no indication that the program may end early, disappointing some investors who thought recent economic data and tax extension may reduce the need for more QE-2+.

The correction in Gold price offered bargain hunters a good reason to enter, restricting the losses. The precious metal started its recovery during the mid-session.

Silver futures for Mar delivery lost 31c, or 1.1%, to 29.198 oz, Platinum fell 13.3, or 0.8, to close at 1,734.1 oz.
Crude Oil price rises on lower supply

US Crude Oil future price climbed back to above 90 bbl Wednesday as supplies dropped last week.

US commercial Oil supplies fell 1.2% to 335.3M bbls last week, according to the US Energy Department. The total is about 2.4% above one year-ago levels.
Crude Oil supplies have dropped in the past 8 weeks or so, returning to a level that is closer to normal than it was early last fall.
Light, Sweet Crude for Feb delivery rose 92c to 90.30 bbl on New York Merc.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities

Referenced Stocks: ETF

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