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Gold Surges on Fed Shift to Buy Treasurys
By Chris Flood
Financial Times
Thursday, March 19, 2009
Gold prices surged on Wednesday after the Federal Reserve announced plans to buy $300bn in US Treasuries as the US central bank expanded its efforts to counter the financial crisis.
The Fed's plans sparked concerns about the outlook for the dollar and inflation, pushing gold sharply higher.
Gold leapt from its session low of $884.10 a troy ounce to a high of $942.90, a jump of 6.6 per cent.
Later in the session, gold eased back to $939 for a gain of 2.7 per cent on the day.
Prior to the Fed's move, Alan Heap of Citigroup said government policies of quantitative easing (increasing money supply to combat deflation) could have a strong impact on the gold price.
Oil prices fell after the latest US inventories data showed larger increases than expected in crude oil, gasoline and distillate stocks.
Nymex April West Texas Intermediate fell $1.02 to $48.14 a barrel while ICE May Brent lost 58 cents at $47.66 a barrel.
US crude stocks rose 2m barrels last week, double the consensus forecast for a 1m barrels increase, following a rise in imports and refineries conducting more seasonal maintenance.
Crude stocks at Cushing, Oklahoma, the delivery point for WTI, rose 300,000 barrels to 33.9m barrels, partially reversing declines in the previous two weeks.
Gasoline stocks rose 3.2m barrels, confounding the consensus forecast for a drop of 1.2m barrels. However, petrol demand continued its recent improvement, averaging 9.04m barrels a day over the past four weeks, up 1.1 per cent compared with the same period a year ago.
Nymex April RBOB unleaded gasoline fell 7.3 cents to $1.3519 a gallon.
Distillate demand reflected the deepening US industrial downturn and the fading of winter weather. Distillate demand averaged 3.81m b/d over the past four weeks, down 9.3 per cent compared with the same period last year.
Distillate stocks (including heating oil) rose 100,000 barrels, below the consensus forecast for an increase of 700,000 barrels. Nymex April heating oil lost 2.4 cents at $1.2510 a gallon.
Cocoa prices rose amid concerns about the prospects for production in Ivory Coast. Disease could reduce the mid-crop (April to September) harvest to just 200,000 tonnes, well below last year's 315,000 tonne output, according to some estimates.
The main crop which runs from October through March has been affected by a lack of rain and growers have complained about small and poor quality beans.
In New York, ICE May cocoa rose 3.1 per cent to $2,471 a tonne while in London, Liffe May cocoa climbed £44 to £1,900 a tonne.
The slump in global steel production has set the stage for protracted and possibly acrimonious discussions to settle annual iron ore contract prices between Chinese buyers and Australian and Brazilian suppliers at this year's negotiations.
Raymond Key, global head of metals trading at Deutsche Bank, said: "We are witnessing a breakdown of the benchmark process and a significant switch to the spot market for transacting business."
Deutsche Bank announced yesterday that it had taken an equity stake in London Dry Bulk, a broker which is expanding from coal into the iron ore market.
"We see parallels in the development of the iron ore market today compared to the physical coal market five years ago," said Clive Murray, managing director of LDB, which will match physical iron ore cargoes between iron and steel industry participants with financially settled swap contracts, providing more liquidity to the market and improved risk management tools.
Armajaro Asset Management, the commodities trader, announced that Michel Danechi, previously head of the emerging markets desk at Lehman Brothers (Europe), would manage a new emerging markets hedge fund to be launched in the first half of this year.
Armajaro currently manages three specialist commodity hedge funds with more than $1bn in assets under management and the new EM fund will employ a macro-based strategy with an equity derivatives bias
SOURCE: http://www.ft.com/cms/s/0/64b7fad6-13b0-11de-9e32-0000779fd2ac.html
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