Written by Sumit Roy  |

December 07, 2012

Week In Review: Gold Successfully Tests Support Ahead Of Fed Decision, Oil Dives Despite Strong Jobs Data

Details

We examine the latest developments in commodity markets and the week's performance.

We saw split price action in commodities once again this week, as the “fiscal cliff” negotiations in the United States continued. Stocks, as measured by the S&P 500, were essentially unchanged in the period, but are up 12.5 percent year-to-date.

Macroeconomic Highlights

Economic data this week were generally positive, but traders were concerned about the lack of progress in political negotiations related to the U.S. fiscal cliff. The main sticking point in the negotiations are tax rates on the wealthy, which Democrats want to see raised, and which Republicans want to see maintained at current rates.

Still, analysts expect that Republicans will eventually accept higher taxes on top earners to avoid the prospect of higher taxes on everyone should the year end without a deal, triggering the expiration of the all of the Bush era tax cuts.

Meanwhile, in Asia, data showed that China's manufacturing sector rebounded in November. The official Manufacturing Purchasing Managers Index (PMI) rose from 50.2 to 50.6 in the month, the highest level since April.

In contrast, the equivalent PMI gauge in the U.S. unexpectedly fell from 51.7 to 49.5 in November, the lowest level since July 2009.

Elsewhere, the European Central Bank kept its benchmark overnight interest rate unchanged at 0.75 percent. The ECB cut its outlook for growth and inflation, citing downside risks. The central bank sees weak growth extending into 2013 before a recovery takes hold in 2014.

Finally, the Bureau of Labor Statistics reported that U.S. employers added 146K jobs in the month of November, much better than the 85K that analysts were expecting. The unemployment rate ticked down from 7.9 to 7.7 percent—the lowest rate since December 2008.

Commodity Wrap