SINGAPORE — Oil and gold reversed course after strong overnight gains as investors refrained from building positions after the dollar’s rebound from its biggest one-day slide in 13 years, while results for the US polls trickled in.
A more than 10% surge in oil in the previous session, thanks to lower exports by Opec nations, and a 5% rally in gold, gave investors reason to take profit and await the outcome of the US presidential poll before building positions.
But industrial metals in Shanghai took their cue from a more than 6% rise in copper prices on the London Metal Exchange in the previous session, gaining 2,5%. Grain and oilseed markets on the Chicago Board of Trade were slightly lower.
US light crude for December delivery fell 1,43 cents to $69,10 a barrel in early trade. It settled up $6,62, or 10,4%, at $70,53 a barrel on Tuesday, the largest one-day gain since Sept. 22, when it soared nearly 16% ahead of contract expiry and weakness in the US dollar.
“The 10% jump last night was fairly extreme and what we’re seeing this morning is nothing more than a partial correction from some profit taking,” said David Moore, a commodities strategist at the Commonwealth Bank of Australia. Democrat Barack Obama is on the cusp of becoming the first black US president with a breakthrough win in Ohio, after winning the key battleground state of Pennsylvania, leaving Republican John McCain fighting for his political life.
As results rolled in, the dollar jumped against a basket of major currencies Moore said oil’s movement would largely be influenced by the dollar, and although the result of the US election was not expected to have a direct impact on crude, prices would probably be swayed by equities markets.
Oil’s surge yesterday came on signs that Opec kingpin Saudi Arabia and other OPEC members had made cuts in crude exports. In the precious metals market, gold was trading at $756,10 an ounce, down $5,85 from New York’s notional close yesterday, when it hit an intraday high of $767,20 an ounce after the dollar dropped against the euro and triggered safe-haven buying.
“Given the significant rise in the price overnight, it bodes well for the rest of the day. We may well want to test the highs again in late afternoon, particularly around the opening of Europe and London,” said Darren Heathcote of Investec Australia. The Reuters-Jefferies CRB index, which tracks 19 commodity futures, rose more than 5% yesterday.
Among industrial metals, the benchmark Shanghai copper jumped 820 yuan to 32590 yuan but London Metal Exchange copper for delivery in three months fell 2,3% to $4250 after rallying more than 6% overnight. “We are in an election-euphoria rally. That could last until Thursday but will fade by next week as the grim reality of the world’s economic situation re-emerges,” Edward Meir, an analyst at MF Global said.
Concurring, a dealer in Shanghai warned: “Trading companies are very cautious. Some of their customers have defaulted and the cost of credit remains very high. The mood is still pessimistic and the best news we can hope for is no more bad news.” Chicago Board of Trade corn for delivery in December fell 0,4% to $4,11 per bushel, while November soybeans lost 0,5% to $9,44-” a bushel.
