Gold surged towards the $1,000 mark on Wednesday as concerns about the global economy led investors to look for a safe haven while European crude oil prices sank below the $40-a-barrel mark for the first time this year .
Gold reached a fresh seven-month high of $984.65 a troy ounce, up 1.6 per cent on the day, with strong investor inflows into exchange traded funds making a challenge on the record $1,030.80 set in March look increasingly likely.
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Investment inflows into gold exchange traded funds have picked up pace this year. The SPDR Gold Trust, the largest physically backed ETF, said its holdings surpassed the 1,000 tonne mark on Tuesday, reaching 1,008.8 tonnes, up by 228.6 tonnes so far this year.
In energy markets, ICE April Brent retreated to a low of $39.35 a barrel before recovering slightly to trade $1.34 lower at $39.69 a barrel.
Nymex March West Texas Intermediate dipped 36 cents to $34.57 a barrel.
Traders and policymakers now view the front month WTI contract as “disconnected” with the rest of the global oil market due to rising stocks at its delivery point in Cushing, Oklahoma.
The rest of the WTI futures curve moved sharply lower with the December 2009 contract down $2.15 to $46.65 while the December 2016 contract fell $3.05 to $68.57 a barrel.
Nigeria said the oil market remained oversupplied, in spite of Opec’s production cuts. The producers’ group is due to meet on March 15 in Vienna and some member countries have already indicated their support for further supply cuts.
Base metals were mixed with aluminium managing to squeeze up 1 per cent to $1,343 a tonne in spite of a massive increase of 139,700 tonnes in London Metal Exchange stocks.
“Total stocks now stand at 7.7 weeks of consumption, reaching levels last seen in the 1990s and we are hearing the market should expect more big deliveries in the coming months,” said analysts at Barclays Capital.
The Chinese government plans to buy 500,000 tonnes of aluminium from domestic smelters, with a bidding process to be held on February 20, but Barclays warned this could be bearish for the global market if it encouraged more production in China to restart.
Norsk Hydro, the Norwegian aluminium producer, said it was preparing for the global economic downturn to last for another two years, although it was hoping for an earlier recovery.
“We hope, not only for the sake of the aluminium industry, that the recovery will come earlier but we have to be prepared for a long period,” said John Ove Ottestad, executive vice- president at Hydro.
Nickel sank below the $10,000-a-tonne mark, falling 1 per cent to $9,750 a tonne while lead lost 2.9 per cent at $1,078 a tonne and tin dipped 0.2 per cent to $10,775 a tonne. Copper rose 1 per cent to $3,240 a tonne, helped by a fall of 1,125 tonnes in LME stocks, while zinc added 1.1 per cent to $1,122 a tonne, also supported by a fall of 3,250 tonnes in stocks.
Traders warned against viewing the stock falls for copper and zinc as indicative of a recovery in demand.
In Australia, flooding has left many key mine supply routes impassable, delaying the shipment of hundreds of thousands of tonnes of copper, zinc, iron ore and precious metals.
In Chicago, agricultural commodities remained under pressure after a sharp fall in the previous session.
Rain has returned to drought-hit Argentina and more wet weather is expected across the country’s agricultural belt. CBOT March soyabeans lost 3 cents at $9.00 a bushel while CBOT March wheat fell 2½ cents to $5.13 a bushel. But CBOT March corn added 1¼ cents to $3.50½ a bushel.
Soft commodities were also weaker, reversing some of its January and early February gains. ICE March raw sugar sank below the 13 cents a pound mark, falling 2.4 per cent to 12.67 cents while Liffe May cocoa was down 2 per cent to £1,872 a tonne.
