Commodities Remain Pressured as GOP Set to Vote on Plan B Despite Obama's Veto

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December 21, 2012 2:16 AM EST

Commodity prices remained under pressure in US morning amid concerns over the stalemated fiscal cliff negotiation. While President Obama threatened to veto the so-called "Plan B" proposed by the GOP, the Republican-controlled House is set to vote for it. Crude oil prices slipped while gold price extended recent weakness with the benchmark Comex contract falling to as low as 1653.1, a level not seen since August.

As widely expected, the BOJ expanded the asset buying program to stimulate the economy and combat inflation. It would increase the size of its asset-buying and lending program by +10 trillion yen to 101 trillion yen unanimously. Half of the increase would be allocated to purchases of treasury discount bills (T-Bills) while the rest would be allocated to Japanese government bonds (JGBs). The overnight call rate target was left unchanged at 0-0.10%. The central bank also indicated the plan to review the guidelines for medium- and long-term inflation, which is now set in a range of 0-2%. With the landslide victory by the LDP, the BOJ is expected to face more political pressure and would push for more aggressive conventional and unconventional monetary easing.

In the precious metals complex, PGMs continued to outperformed gold and silver. Workers at Lonmin's Marikana mine threatened to strike. The company is accused of breaking the agreement to grant workers a +22% wage increase and a one off 22% bonus payment. We expect labor action in South Africa remains a key factor supporting PGM prices next year.

On the dataflow, UK's retail sales stayed unchanged from a month ago in November, compared with a -0.7% drop in October. Canada's retail sales gained +0.7% m/m in October, up from +0.1% in the prior month. US GDP in 3Q12 was revised up to +3.1%, from +2.7% in the second estimate. Initial jobless claims unexpectedly soared +18K to 361K in the week ended December 15. Philly Fed survey probably recovered to -3 in December from -10.7 in November while existing home sales might have risen to 4.9M in November from 4.79M in October.

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Oil and Gold Reports contributed by Oil N' Gold

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