OPEC leaves output unchanged

OPEC agreed to keep its production levels unchanged on Thursday, betting that higher oil demand as the global economy recovers would push prices towards the cartel’s target of $75-$80 a barrel by the end of the year.

Opec, which produces about 40 per cent of the world’s oil, has announced three output cuts since September, totalling 4.2m b/d – about 5 per cent of global oil demand – in an effort to shore up oil prices.

While gold consolidated around the $950 an ounce level, caution dominated sentiment in commodity markets amid concerns about the outlook for the dollar and pressures in the Treasury bond market due to soaring levels of government debt.

Nymex July West Texas Intermediate traded just 2 cents higher at $63.47 a barrel afar reaching $63.82 during the previous session, a fresh seven-month high. ICE July Brent dipped 6 cents at $62.44 a barrel.

Gold traded at $9487.70 a troy ounce, moving between a low of $943.55 and a high of $951.55 after ending trading in New York in the previous session at $948.

Investor inflows into gold exchange traded funds have stalled with holdings in the SPDR Gold Trust, the largest physically backed fund unchanged at 1,118.76 tonnes since May 22.

John Reade, precious metals analyst at UBS said investors in the gold market were concerned about increasing levels of government debt, the threat of currency debasement and rising inflationary pressures.

“We suspect that the recent moves in US fixed income markets (the benchmark US 10-year Treasury yield rose 19 basis points to 3.74 per cent on Wednesday) have strengthened the case for owning gold and that any sign of a push higher in TIPS spreads towards and beyond the 2.71 per cent high seen over the past five years could trigger considerably more interest in gold as a hedge against inflation,” said Mr Reade.