Oil And Gold Analysis: August 16, 2012

Crude oil prices were bullish yesterday after stockpiles drop, intensifying tensions in Middle East, and better than expected US industrial production. Its September contract climbed $2.21 to $94.89 a barrel from $92.68 after US energy department reported supplies dropped 3.7 million barrels and total oil use reached the highest level in nine months in the seven days ended 10th of August. Oil inventories dropped 1 percent to 366.2 million barrels, the lowest level since 6th of April.

Petroleum consumption jumped 5.7 percent to 20 million barrels a day. Meanwhile, Saudi embassy called its citizens to avoid going to Lebanon under the current circumstances, the Saudi Press Agency reported. The Meqdad clan, an extended family that belongs mostly to Lebanon’s Muslim Shiite community, kidnapped more than 20 Syrians in retaliation for the abduction of one of its members in Syria, the Lebanese Broadcasting Corporation reported, citing a spokesman of the family.

In Syria, a bomb exploded close to the army headquarters as the U.S. accused Iran of training a new militia to ease pressure on Syrian President Bashar al-Assad’s government. The regime is collapsing emotionally and politically, former Prime Minister Riad Hijab said in his first public appearance since defecting to Jordan. In Israel, dozens of people were in panic buying in front of a storefront at a Jerusalem shopping mall Tuesday to pick up new gas masks, part of civil defense preparation in case the military strikes Iran.

Gold
Gold prices reacted a little bit despite US consumer price index came flat for the month of July. US consumer inflation raised hopes for monetary stimulus however; due to a thin volume gold forgot to react heavily. Gold has failed to break out of a range between $1,525 and $1,680 an ounce in the past four months as disappointment over a lack of more aggressive stimulus by the U.S. Federal Reserve and other central banks dampened buying. However, lackluster global economic indicators put a floor under the metal.

The Labor Department said its consumer price index for July showed that prices were unchanged for the second consecutive month with a continued drop in energy prices offset by higher prices for food, shelter and medical care. Energy prices showed a modest decrease for the month, edging down by 0.3 percent in July after tumbling by 1.4 percent in June.

The continued drop in energy prices was largely due to a 1.3 percent decrease in electricity prices, which helped to offset a 0.3 percent increase in gasoline prices. Meanwhile, the report showed that food prices crept up by 0.1 percent in July following a 0.2 percent increase in the previous month. Higher prices for cereals and bakery products and meats, poultry, fish, and eggs contributed to the modest increase in food prices.