FKLI Commentary on 10/12/08

FKLI November futures contract close marginally 1.5 points higher compare to previous trading session at 841.5 with total of 5490 lots traded in the market. FKLI traded lower despite open higher in the morning trading session due regional indices especially Hang Seng index and Dow Jones futures electronic trading retrace after riding on bull rally on previous trading days.

Technically, FKLI meet 150% Fibonacci projection at 865 during trading session but traded downwards and rested on the hourly trend line. Based on the hourly FKLI price movement, we expect FKLI would traded upwards in the coming trading session provided critical support levels at 830 and 803 were not violated; same apply to support trend line. However, FKLI were expecting to encounter great selling pressure around 860.

Gold Little Changed as Dollar Strengthens; Platinum Declines

Dec. 9 (Bloomberg) -- Gold traded little changed in Asia as the dollar gained, eroding the appeal of the precious metal as an alternative investment. Platinum declined.

The dollar advanced as much as 0.5 percent against a weighted basket of six major currencies, paring yesterday’s 1.8 percent loss after U.S. President-elect Barack Obama’s pledge to spend more on infrastructure boosted stocks and reduced the currency’s haven appeal.

“In the near term, gold prices may be hostage to financial markets’ evaluation of the Obama stimulus plan,” James Steel, an analyst at HSBC Securities in New York, said in a report today. “Whether gold will be able to sustain Monday’s rally will depend in large part on the direction of the U.S. dollar.”

Bullion for immediate delivery fell 17 cents to $772.53 an ounce at 10:35 a.m. in Singapore. Gold for February delivery added 0.4 percent to $772.50 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Obama pledged Dec. 6 to boost the economy with the biggest public-works spending package since the 1950s, including investment in roads, bridges and public buildings. The dollar was at $1.2868 euro from $1.2963 late in New York yesterday. It reached $1.2563 on Dec. 2, the lowest since Nov. 21.

Gold for October delivery dropped 1.9 percent to 2,293 yen a gram ($768 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break. Shanghai gold for June delivery added 0.9 percent to 169.98 yuan a gram ($767 an ounce).

Platinum Falls

Immediate-delivery platinum fell 2.4 percent to $812 an ounce at 10:06 a.m. Singapore time. The metal used in vehicle catalytic converters rose the most in two weeks yesterday after Congressional Democrats sent President George W. Bush a draft proposal for a $15 billion, short-term rescue of U.S. automakers and said it will likely be voted on this week.

The metal for January delivery was down 3.3 percent at $815.60 an ounce in New York, and October-delivery platinum on the Tokyo Commodity Exchange lost 5.1 percent to 2,398 yen a gram.

“If passage of the plan is delayed, we believe that the platinum group metals might give up considerable ground on disappointed selling,” said Steel.

Automakers account for more than 60 percent of global platinum consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. Palladium, as well as platinum, is used to make catalytic converters for car and truck exhaust systems.

Among other precious metals for immediate delivery, silver was little changed at $10 an ounce, and palladium was up 2.1 percent at $180.75 an ounce.

Oil Extends Gains After Obama Pledges Spending Boost for U.S.

Dec. 9 (Bloomberg) -- Crude oil extended its gains after rallying for the first day in seven yesterday on President-elect Barack Obama’s pledge to revive the economy with the biggest U.S. public works program in a half century.

Commodities, including oil, copper and corn, climbed on speculation spending on roads, bridges and repairing school buildings will boost raw material demand. Congress and President George W. Bush also are close to agreeing on a $15 billion rescue of U.S. automakers that may be signed this week.

“The markets are cheered by the move to bail out the automobile industry and the emphatic statements from the Obama team that are pointing to a massive stimulus package,” said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York.

Crude oil for January delivery rose 17 cents, or 0.4 percent, to $43.88 a barrel at 10:28 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, futures increased $2.90, or 7.1 percent, to $43.71 a barrel. They touched $40.50 on Dec. 5, the lowest since Dec. 13, 2004. Prices have fallen 70 percent since reaching a record $147.27 in July.

Obama, in a television interview Dec. 7 on NBC, reiterated his commitment to the biggest investments in the nation’s infrastructure since President Dwight D. Eisenhower created the interstate highway system in the 1950s. The U.S. president-elect takes office on Jan. 20.

General Motors

A proposal unveiled yesterday by congressional Democrats would require the president to appoint a person or board to oversee long-term restructuring of the auto industry as a condition for receiving federal aid. General Motors Corp., Ford Motor Co. and Chrysler LLC would be eligible for loans.

White House and congressional leaders said a final accord was likely yesterday and the House and Senate will return for special sessions this week to vote on the package.

Stocks rallied worldwide, led by commodity producers, on Obama’s pledge to increase infrastructure spending. The Dow Jones Industrial Average rose 298.76, or 3.5 percent, to 8,934.18. The Standard & Poor’s 500 Index increased 33.63 points, or 3.8 percent, to 909.70.

Last week, oil fell the most since 1991 and metal prices slumped after economic data showed the recession is getting worse. The U.S. economy lost 533,000 jobs in November, bringing job losses this year to 1.91 million.

Copper, Corn

“The main reason oil and most other commodities are up today is the strong rally in equities,” said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois, said yesterday. “I wouldn’t read too much into this move. After oil fell 25 percent last week, you would expect a correction.”

Copper futures for March delivery rose 1 cent, or 0.7 percent, to $1.5080 a pound on the Comex division of Nymex. Yesterday, they added 12.45 cents, or 9.1 percent, to settle at $1.498 a pound, the biggest one-day increase since Oct. 29.

Corn futures for March delivery rose 20.75 cents, or 6.7 percent, to settle at $3.30 a bushel yesterday on the Chicago Board of Trade.

The Reuters/Jefferies CRB Index of 19 raw materials climbed 5.2 percent to 219.36 yesterday. The gauge lost 54 percent since reaching a record in July as the credit crunch choked worldwide growth.

Natural gas futures in New York fell for a fifth day after Dow Chemical Co., the largest U.S. chemical maker, said it plans to shut plants and cut jobs because of declining sales. Gas was up 3.4 cents, or 0.6 percent, to $5.600 per million British thermal units at 10:08 a.m. in Sydney. It fell 17.6 cents, or 3.1 percent, yesterday to settle at $5.566 per million in New York.

Falling Dollar

“It’s the Obama magic,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “Talk of stimulus and bailout are giving most commodities a boost. There are also rumors that OPEC will enact a large cut at the Dec. 17 meeting.”

Libya’s top oil official, Shokri Ghanem, said yesterday that the Organization of Petroleum Exporting Countries should make a “substantial” output cut at its meeting in Algeria.

Saudi Arabian Oil Co. announced yesterday it will reduce crude oil supplies to Japan in January for a second month. Saudi Aramco is the world’s largest state oil company.

“Prices should continue to firm up as we approach the meeting,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. “I think there will be further actions taken by the Saudis and the rest of the cartel because they don’t want to see further declines.”

OPEC pumps more than 40 percent of the world’s oil and agreed to cut daily output 1.5 million barrels in October as prices slumped and inventories rose. Chakib Khelil, OPEC president, said on Dec. 6 that the group may make a “severe” reduction in production to stem the 70 percent decline in prices from July’s record.

Brent crude oil for January settlement rose $3.68, or 9.3 percent, to settle at $43.42 a barrel on London’s ICE Futures Europe exchange.

Gold Rebounds as Dollar Drops, Commodities Rally; Silver Jumps

Dec. 8 (Bloomberg) -- Gold rose, rebounding from the biggest weekly loss since October, as the dollar declined, boosting the appeal of the precious metal as an alternative investment. Silver jumped the most in two weeks.

The dollar fell as much as 1.7 percent against a weighted basket of six major currencies. The Reuters/Jefferies CRB Index of 19 raw materials climbed as much as 4.7 percent after President-elect Barack Obama pledged the largest package of public-works spending since the 1950s.

“You’ve got the dollar weakening, and gold could not get to new lows,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “The facts are on the positive side today with a lot of new buying coming in.”

Gold futures for February delivery rose $17.10, or 2.3 percent, to $769.30 an ounce on the Comex division of the New York Mercantile Exchange. The metal fell 8.2 percent last week, the most since Oct. 17.

Silver futures for March delivery rose 54.5 cents, or 5.8 percent, to $9.975 an ounce, the biggest gain since Nov. 24. The metal is still down 33 percent this year.

Gold and other commodities often move in the opposite direction of the dollar. Gold is heading for the first annual loss since 2000, while the greenback is poised for the first gain since 2005.

The dollar index has gained 12 percent this year, while gold dropped 8.2 percent. For the metal to sustain a rally, the dollar has to weaken further, analysts at Deutsche Bank AG said in a report on Dec. 5.

‘False Breakouts’

The U.S. may “employ a weaker dollar to reduce deflation risks,” Deutsche Bank said. “In this environment, we would expect rallies in the gold price to be based on more solid foundations, in contrast to the false breakouts that have occurred over the past few months.”

Since the collapse of Lehman Brothers Holdings Inc. in September, gold has traded as high as $936.30 on Oct. 10 and as low as $681 on Oct. 24. Some investors sold gold futures to raise cash and cover losses in other markets.

The Standard & Poor’s 500 Index has dropped 39 percent this year.

“Gold is still vulnerable to another round of asset deleveraging,” McGhee of Integrated Brokerage Services said.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was little changed last week at 757.9 metric tons. The record was 770.6 tons on Oct. 10.