outlook

Crude oil dived under $50 a barrel to hit the lowest level since May 2005, deepening losses as financial markets reflected ever lower confidence in the world economy and evidence mounted of falling fuel demand. As economic slowdown has destroyed fuel demand, oil companies plan to store millions of barrels of oil in the hope economics will improve. Oil differs from other commodity markets in that producer group the Organization of the Petroleum Exporting Countries can intervene to curb supplies, in theory providing support for prices. Since early September, OPEC has said it will remove around 2 million barrels per day from international markets, but market has taken the view that falling demand is a bigger factor than tightening supply.

Gold alleviated more than 2% as physical gold bullion buying offset a broad-based commodity decline, a strong dollar and further losses in equity markets. Gold came off its initial high as U.S. stocks slid as much as 3% early, prompting liquidation across all asset classes. Strong physical buying of gold such as coins and bars boosted prices, and demand increased with price dips. Global demand for gold jumped 18% year-over-year to 1,133.4 tonnes in the third quarter, as strong buying by investors at a lower gold price reversed a weaker trend earlier this year according to the World Gold Council. Gold however consolidating and trading at $720-$752 technical levels. Gold held up well despite a 5% tumble of crude oil, trading just above $50 per barrel.

The number of U.S. workers filing new claims for jobless benefits surged by a larger than expected 27,000 for the week to their highest level in 16 years, according to the Labor Department, as a harsh economic environment forces employers to cut back on hiring. Initial claims for state unemployment insurance benefits were a seasonally adjusted 542,000 for the week from a revised 515,000 the previous week. A Labor Department official said there were no special factors influencing the report. However analysts polled by Reuters had forecast 505,000 new claims versus a previously reported count of 516,000 the week before. Moreover New York-based Conference Board states in its monthly forecast of economic activity declined 0.8% in October, worse than the 0.6% decrease expected by economists surveyed by Thomson Reuters. Over the last seven months, the index declined at a 4.7% annual rate, faster than any decline since 2001. Most of the decline was due to the plunge in stock prices, the drop in building permits and the decline in consumer expectations.

The price of copper tumbled as rising stockpiles and recession fears underscored the red metal's weaker demand outlook. Record lows in U.S. housing starts, surging inventory levels in London warehouse stocks, declining global equity markets, strength in the dollar, and uncertainty whether U.S. automakers will win emergency government loans contributing to copper's bearish tone. Fears of a deep global recession heightened after U.S. jobless claims jump to their highest level in 16 years.


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