AFP: Commodity prices: Volatile week for oil and gold
LONDON: Oil and gold prices endured a volatile week as investors reacted to mixed news on the Chinese economy, a massive consumer of commodities in recent years.
Traders brushed aside official data yesterday showing the United States had shed 651,000 jobs in February amid a worsening recession in the key consumer of raw materials, as the data matched analyst forecasts.
“The only comfort is that the news was largely in line with the already gloomy expectations and there is just the slightest glimmer of hope that conditions may be improving,” said Capital Economics analyst Paul Ashworth.
OIL: Crude oil prices see-sawed between losses and gains as traders tracked the outlook for energy demand and the spreading global financial crisis.
Prices had plunged on Monday after more alarming news in the financial sector sent markets into a tailspin, amid fears of a deepening downward global economic spiral.
Investors also reacted to news of another massive government bailout for American International Group. The latest AIG rescue, worth $30bn, came as the US insurer posted a $61.7bn quarterly loss—the biggest in US corporate history. Crude oil futures then rebounded Tuesday as the market reconsidered worries about weak US energy demand.
Oil continued to bounce higher Wednesday on news of sliding American crude reserves, which indicated solid demand, traders said. The US government’s Energy Information Administration (EIA) said crude oil stockpiles sank 700,000 barrels in the week ending February 27. Market expectations had been for a gain of one million barrels.
But the market hit reverse gear on Thursday as investors took profits and appeared dismayed that China did not deliver new hoped-for stimulus measures.
Oil prices then recovered somewhat on Friday despite news of the massive job losses in the United States.
The US is the world’s biggest energy consuming nation followed by number two China.
The energy market was meanwhile moving its focus towards the upcoming production meeting of ministers from the Organization of Petroleum Exporting Countries (OPEC) in Vienna on March 15.
OPEC, which pumps 40 percent of the world’s oil, cut output late last year by a total 4.2 million barrels per day in a bid to reverse tumbling prices and protect its revenues. By yesterday on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in April firmed to $44.66 a barrel from $43.51 a week earlier. On London’s InterContinental Exchange (ICE), Brent North Sea crude for April fell to 44.10 dollars a barrel, from 45.49 dollars a barrel.
PRECIOUS METALS: The price of gold steadied after sliding a week earlier. “The rise in US jobless claims, central bank rate cuts and absence of fresh Chinese stimulus plans ... acted as a reminder all is not well with the world’s economies, triggering a rout in equity sentiment and renewed safe-haven demand into precious metals,” said James Moore at thebulliondesk.com.
The Bank of England and the European Central Bank (ECB) slashed interest rates to record lows on Thursday in a new attack on the raging and relentless global economic crisis.
In Frankfurt, the ECB hacked its eurozone base rate back by half a point to 1.50 percent—its lowest level in the bank’s 10-year history—and governor Jean-Claude Trichet said the rate could be cut even further.
In London, the Bank of England cut interest rates too by half a point to just 0.50 percent, while also announcing plans—dubbed quantitative easing—to pump 75 billion pounds in newly created money into Britain’s economy in an unprecedented move aimed at boosting bank lending.
“Quantitative easing is the last-chance saloon for the Bank of England,” GFT market strategist David Morrison said.
By yesterday on the London Bullion Market, gold stood at to $936 an ounce at the late fixing, almost unchanged from $936.50 reached a week earlier.
Silver rose to $13.46 an ounce from $13.21.
On the London Platinum and Palladium Market, platinum gained to $1,071 an ounce at the late fixing yesterday from $1,059 a week earlier.
Palladium jumped to 202.50 dollars an ounce from 195 dollars.
BASE METALS: Base metals prices rallied, with copper hitting a near four-month high of 3,785 dollars a tonne. “Copper prices are rebounding strongly and could yet challenge the $4,000-$4,500 a tonne area but the rally is not sustainable,” said Calyon analyst Robin Bahr.
