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1. Goldman Sachs Slashes Oil Forecast
2. ECB Pres.: Global Growth to Continue
3. Gold Bounces Off Lows. Time to Buy?
4. India PM Pushes to Open Economy
1. Goldman Sachs Slashes Oil Forecast
Goldman Sachs has cut its forecast for the price of oil for the second time in a
little over three weeks. The investment bank now says oil prices will reach $69
a barrel this year from $72.50 on Dec. 22, reports Reuters.
Goldman's 2007 oil forecast was the most bullish among analysts when it was
released in the middle of 2006. At that time, when oil prices were headed to
their mid July high of $78.40 a barrel, Goldman predicted oil prices would hit
$75.50 a barrel in 2007. Since then, oil prices have sunk to around $55 a barrel
in recent days.
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Still, Goldman remains one of the most bullish analysts. According to a Reuters
poll of more than 30 analysts, Goldman is in the top 10. The poll of 34
analysts, taken in late December before oil's most recent drop, showed an
average forecast of $63.48 a barrel for 2007.
Goldman cited warmer than usual weather for cutting its forecast.
"Although some of this warm weather was already embedded in our price forecasts,
the weather deviation since mid-December . . . through first part of January
will likely reduce oil demand by a further 46 million barrels relative to our
prior assumption of normal weather, which would be worth approximately $3.70 a
barrel to the oil price," it said in a report dated Jan. 5.
"We believe that producer selling likely contributed to the sell-off, as did
investor positioning heading into 2007, as the energy price sell-off was part of
a broader commodity sell-off," the report continued.
"The weather shock should be viewed as temporary and underlying oil fundamentals
remain relatively constructive," the report added.
Goldman remains long-term bullish on oil. That's no surprise considering Goldman
is one of the world's top two energy traders.
Editor's Note:
2. ECB Pres.: Global Growth to Continue
Global economic growth this year may well be close to that of 2006, European
Central Bank President Jean-Claude Trichet said Monday.
"The sense of the meeting would be that after a year that has been very, very
good at a global level, this year might be of the same level of magnitude —
maybe a bit lower, but not far," he said after a meeting of the Group of 10
leading nations' central bank governors.
The G10 central bankers held talks on the sidelines of a meeting of the Bank for
International Settlements, which began Monday.
Trichet also said fears about a U.S. economic crash were exaggerated, noting
that the world's biggest economy would likely make a soft landing and that the
rest of the global economy would be able to adapt without disruption.
On Sunday, Rodrigo de Rato, managing director of the International Monetary
Fund, offered a similar outlook, noting the strength of the world economy would
offset any downturn in the United States.
"The world economy is moving into another year of strong growth," de Rato told
journalists ahead of the BIS meetings in Basel. "We certainly are living in a
very benign scenario for financial conditions and liquidity.
"Certainly, from the point of view of the U.S., our central scenario is a soft
landing," de Rato said.
Trichet said and he other central bankers see global economic growth as "very
encouraging" and that it may continue in 2008.
"We have said that if we are wise in our own policy . . . there is good reason
to see a continuation of this period," Trichet said. "That doesn't mean there
are not risks."
© 2007 Associated Press.
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3. Gold Bounces Off Lows. Time to Buy?
Gold moved higher on Monday after plunging to two-month lows in the previous
session on a dollar rally, with the metal getting support from physical buyers
and bargain hunters, analysts said.
But gold remained under pressure because of a decline in base metals prices,
they said.
"There is relatively strong support at $600 an ounce, but if you have got a
sell-off of base metals across the board, then it would be relatively difficult
for gold to be isolated from that," said Michael Widmer, metals analyst at
Calyon Corporate and Investment Bank.
"Overall, I would still say that there are more indicators for a weakness in the
dollar and that should support gold prices going forward. For the rest of this
year, the macro-economic picture would be probably weaker rather than stronger,"
he said.
Spot gold was quoted at $609.00/610.00 an ounce by 1533 GMT, compared with
$606.70/607.70 in New York on Friday, when it fell as low as $601.70 after the
dollar surged.
"We remain buyers of dips as we consider the recent sell-off to be overdone,"
said John Reade, precious metals strategist at UBS Investment Bank.
Bullion investors were cautious because of a fall in base metals, with copper
extending last week's heavy losses and putting other metals under pressure.
The dollar steadied near six-week peaks versus the euro, keeping gains made in
the wake of surprisingly strong U.S. jobs and manufacturing data.
Gold often moves in the opposite direction of the dollar and is seen as a hedge
against oil-led inflation.
"At these lower levels, physical demand is expected to provide some form of
support, at least in front of the psychological level of $600 and again at
$590," Standard Bank said in a daily report.
James Moore, metals analyst at TheBullionDesk.com, said Friday's sell-off in
gold appeared a little excessive, and lower prices might generate technical as
well as physical buying.
But Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's
Heraeus, was not that positive.
"With many traders and investors being caught on the wrong foot in both markets,
it seems, however, doubtful that they are able to provide the necessary
short-term support that is needed to stabilize the gold price right now," he
said.
In other precious metals, silver was last quoted at $12.30/12.37 an ounce after
falling to a new two-month low of $12.00, versus $12.18/12.25 in the U.S.
market.
Platinum prices rose to $1,124/1,130 an ounce from $1,105/1,110, while palladium
dropped $1 to $330/335.
© 2007 Reuters.
Editor's Note:
4. India PM Pushes to Open Economy
Prime Minister Manmohan Singh on Monday asked Indian business leaders to prepare
for a more open economy, saying they can no longer seek protection through
tariffs as the country increasingly gets integrated with the world.
Singh said his government planned to gradually ease currency restrictions and
reduce tariffs to the low levels prevailing in other Asian countries.
"Indian industry can no longer seek excessive protection through tariffs and
must, therefore, prepare for the brave new world of global integration," Singh
told business leaders.
His comments came ahead of this week's East Asian Summit in the Philippines that
Singh plans to attend.
"We remain committed to increased economic interaction between India and the
economies of East and South East Asia . . . This requires greater openness on
our part," he said. "We have laid out a timetable for tariff reduction and we
must adhere to it."
India has progressively cut duties and taxes since 1991, after it began
switching from a Socialist-style system into a market economy, but the domestic
industry still enjoys relatively high levels of protection in several areas.
High tariffs in some areas have delayed a free-trade pact that India is
negotiating with the 10-member Association of South East Asian Nations, or
ASEAN.
India's other trading partners also routinely complain about its tariff
structure. The European Commission in November asked the World Trade
Organization to intervene over India's high duties for imported spirits and
wine.
Pressure is mounting on India to expedite its economic liberalization as global
companies see exciting opportunity in the South Asian economy, which is growing
more than 8 percent annually.
On Monday, Singh said India would eventually have to lower its tariffs and urged
domestic businesses to get ready for more competition from overseas companies.
He said the Indian government was working to simplify its tax regime and other
rules that would make the environment more "conducive to improved economic
performance."
But "it is the responsibility of businesses to ensure that our firms become
globally more competitive," he said. "Our economy has to be more closely
integrated with that of our immediate and distant neighbors."
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