Gold prices consolidated on Friday above $950 an ounce, a two-month peak, supported by the weakness of the US dollar and worries that other big economies could follow the UK and see their sovereign debt top-notch ratings’ under review.
In London, spot gold traded at $952.30 an ounce, unchanged from Thursday, at the highest level since mid-March. In New York, Comex gold futures for delivery in August traded at $954 an ounce, while traders reported investors buying upside protection, with call options for December at $1,100 an ounce moving volume.
John Reade, a precious metal strategist at UBS in London, said bullion’s recent strength appeared to have been triggered by a combination of factors. The leading factor is the dollar and the threat to the UK’s triple-A rating, but he also mentioned “rising market inflation expectations and signs of concern about US assets across the spectrum.”
“We hold our one and three month forecasts at $950 and $1,000 an ounce respectively,” Mr Reade said. “Gold could run higher to take out the all-time high of $1030 an ounce from February last year.”
The rise in gold prices comes in spite of dreadful jewellery demand, the traditional backbone of the market, in the first quarter. The industry-backed World Gold Council reported that jewellery consumption fell by almost a quarter between January and March compared with the same period last year to a 20-year low.
Other commodities markets were also moving higher, with crude oil trading above $61 a barrel and several agricultural and soft commodities hitting fresh peaks.
Nymex July West Texas Intermediate rose 54 cents to $61.59 a barrel while ICE July Brent moved 59 cents higher to $60.52 a barrel.
Oil traders in the physical market remain puzzled about the recent strength in oil prices in spite of almost record high inventories and weak demand in the US and Europe. The focus will soon move towards Opec, the oil cartel, which meets next week in Vienna to discuss its production policy.
Agricultural commodities were higher and supported by strong buying from China and continuous wet weather in the US, which is delaying the critical planting of corn and soyabean. CBOT July soyabean jumped 7 ¼ cents to $11.82 ¼ a bushel, near a eight-month high, while CBOT July corn moved 5 ¼ cents to $4.29 ¼ a bushel, hovering near a four-month high.
In the soft commodities market, high-quality Arabica coffee jumped to a fresh eight-month high on a low crop in Colombia, the world’s third largest exporter, and traders’ avoidance to bet on lower prices as the Brazilian crop enters the time of the year when it can suffer from frost damage.
ICE July Arabica coffee rose 1 per cent to 137.05 a pound, its highest level since September, a 22.2 per cent increase since the beginning of the year. Sugar also moved higher, but cocoa fell.
Base metals moved higher across the board, recovering some of Thursday’s losses. Copper for delivery in three months at the London Metal Exchange rose 2.2 per cent to $4,590 a tonne.
