Gold rises despite news of India tax increase

Gold futures rose modestly in the early going of Tuesday’s Asian session even after India announced it would increase import taxes on bullion to reduce its trade deficit.

As was previously speculated upon, India, the world’s largest gold buyer, raised its import tariff on gold and platinum to 6% from 4%. India, Asia’s third-largest economy, is hoping the high tax rate on the two precious metals will curb a current account deficit at a time when the country is working to keep its investment-grade credit rating. The bulk of India’s current account deficit is attributed to the country’s voracious appetite for gold.

In March 2012, India raised taxes on gold bars and coins, but demand for the yellow metal still moved higher. Indian policymakers said the new tax increase could be reviewed if gold imports drop too dramatically.

Oil falls on oversupply concerns

Oil futures were mixed in the early part of Tuesday’s Asian session as traders pondered the notion that supply may once again outstrip demand this due to a tepid global economic recovery. Trade was sluggish because U.S. markets were closed Monday due to the Martin Luther King, Jr. national holiday.

The Organization of the Petroleum Exporting Countries (OPEC) recently announced its member states have been paring production in an effort to avert significant price retrenchment. The 12-member cartel accounts for 40% of global oil output.

Even after Saudi Arabia, OPEC’s largest producer, announced a December production cut, OPEC said it expects global oil supplies will be more than sufficient to cover demand this year.

News of ample supplies and limited demand are seen as keeping a lid on oil futures prices despite ongoing civil unrest in the Middle East and North Africa. Following a four-day siege at a natural gas facility in Algeria, an OPEC member, other major North African producers such as Libya and Egypt have been increasing security at their energy facilities. Libya, also an OPEC member, is home to Africa’s largest oil reserves.

Also seen contributing to robust oil supplies this year is increased production in the U.S. Due to increased production at various shale formations, the U.S., the world’s largest oil consumer, is moving from net importer to net exporter of oil.

The U.S. Energy Information Administration recently said it expects increased U.S. oil production to reach record levels this year.

Elsewhere, Iraq, also an OPEC member, said on Monday it discovered a new oil field with at least 1 billion barrels of reserves in the southeastern part of the country. Iraq is home to the world’s fourth-largest oil reserves.

Natural gas prices extend gains as cool weather holds

Natural gas futures extended Friday's gains into Monday as weather forecasts continued to indicate that a cold snap across much of the central and eastern portions of the U.S. won't ease up in the coming days.

Demand for heating fuels should stay high in the coming days thanks to cooler temperatures in place across much of the U.S.

Natural gas futures are very sensitive to weather reports in the U.S. winter.

The U.S. heating season running from November through March sees peak demand for gas.

About half of U.S. households use gas for heating purposes, according to Energy Department data.

The commodity continued to see support from official data pointing to declining stockpiles.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended Jan. 11 fell by 148 billion cubic feet compared to market expectations for a decline of 136 billion cubic feet, which took many market participants by surprise.

Inventories fell by 89 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 144 billion cubic feet.

Total U.S. natural gas storage stood at 3.168 trillion cubic feet as of last week. Stocks were 147 billion cubic feet less than last year at this time and 316 billion cubic feet above the five-year average of 2.852 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 92 billion cubic feet above the five-year average, following net withdrawals of 86 billion cubic feet.

Stocks in the Producing Region were 156 billion cubic feet above the five-year average of 957 billion cubic feet, after a net withdrawal of 39billion cubic feet.