Commodities prices dipped on Monday as a strengthening US dollar dimmed the appeal oil and gold as alternative investments.
Dollar strength, caused in part by better-than-expected US employment data last week, has put pressure on crude, gold and other dollar-denominated commodities as it increases their relative price for investors operating in other currencies.
In the energy market, the US benchmark Nymex July West Texas Intermediate crude oil fell $1.01 to $67.43 a barrel – down 4.5 per cent from Friday’s seven-month high of $70.32. ICE July Brent, the European benchmark, shed 99 cents to $67.35.
“Given the failure of WTI to confirm a break of $70 a barrel, some consolidation is likely,” said Olivier Jakob, of Petromatrix, the Swiss-based oil consultancy.
Last week Goldman Sachs’ influential commodities research team turned bullish on oil, raising its year-end projection from $65 a barrel to $85 a barrel and dropping its earlier expectations of fall over the next three months.
Other commodities markets were mostly lower. Spot gold fell 0.7 per cent to $947.05 a troy ounce to the lowest level in more than a week, weighted down by the dollar.
Data showing investment in the SPDR Gold Trust, the world’s biggest bullion-backed exchange traded fund, had fallen slightly was taken by some in the market as evidence that broader investor appetite for gold could be waning.
UBS however noted that data released by the US federal commodities regulator on Friday showing investors and speculators had increased net long positions in gold futures. “We remain positively disposed towards gold for this year as we expect safe haven buying to resume at some point, but gold as an anti-dollar is a dangerous trade when Comex [the New York gold futures market] speculators are as long as they are,” said John Reade, a precious metals strategist at UBS.
Industrial metals prices dipped along with oil, meaning the rationale for buying gold as a hedge against commodity-driven inflation lessened.
Among base metals copper shed 1.6 per cent to $4920 per tonne, while zinc, lead and nickel all edged lower. Aluminium however gained 2 per cent to $1599 per tonne.
Agricultural commodities were mixed. CBOT July soyabean surged to a fresh 9-month high at $12.39 ½ a bushel, but later traded down 6 ¼ cents to $12.19 ¼ a bushel. Wheat and corn also moved lower, but prices were well supported as traders are anticipating a drop in US agricultural commodities inventories when the US Department of Agriculture releases its new forecast later this week.
