Crude oil closed little changed on Thursday. Interestingly, the initial reaction of crude on better than expected US labour market data (Initial jobless claims dipped below 400 thousand for the first time since April this year) was to the downside as the news had supported the US dollar.
Today, markets will once again focus on the ongoing debate on the US debt ceiling. Apart from that, the figure on the Q2/11 US GDP will be released today. However, even in case of a wide deviation from consensus (positive or negative) it is not that easy to predict what card markets will play.
A strike at the world’s top copper mine (Chile’s Escondida) that has continued for seventh day today, has shielded the price of the red metal against the stronger US dollar on Thursday.
Nonetheless, today’s announcement of Moody’s that the agency put Spain’s credit rating on a review further bolsters US dollar, which is particularly apparent on the price of copper. Despite that, the metal is still trading slightly above 9800 USD per ton level.
Despite some profit-taking, the price of gold remains well supported by US debt talks and a new wave of credit rating reviews in the Euro zone. As far as the possible reaction to the prospective cut in US rating is concerned, we think that gold might further strengthen. Of course, a million dollar question is how much of a downgrade is already priced in.