Gold prices dive to 2.5-month low
LONDON : Commodities mostly fell last week on the back of the strong dollar, which surged following news of a surprise package of deflation-fighting stimulus measures in the euro zone.
“Weakness across the commodity space resumed this week,” said Saxo Bank analyst Ole Hansen.
“Multiple factors drove this weakness, not least the continued surge in the dollar, which gathered additional momentum following the surprise intervention on rates and bonds from the ECB.”
The European Central Bank (ECB) cut its key interest rate to a record-low of 0.05 percent on Thursday, from 0.15 percent, and announced an asset-purchase plan in order to counter deflation pressures, boost lending and lift sluggish growth in the euro zone.
In reaction, the euro slumped to a 14-month low of $1.2920, while the dollar leapt to 105.71 yen — last seen in early October 2008.
A stronger greenback makes dollar-priced oil and commodities more expensive for buyers using weaker currencies. That tends to dent demand and push prices lower.
“The announcement… that the ECB had cut rates to a record low, while pledging to buy hundreds of billions of bonds in order to support the euro zone, triggered a major move in the dollar,” added Hansen.
OIL : The oil market fell as official data showed the US economy — a major consumer of raw materials — added 142,000 jobs in August, dashing hopes for a gain of 200,000.
The mood was soured after official data confirmed that the 18-nation euro zone economy stagnated in the second quarter with zero growth.
Traders also eyed abundant global crude supplies and digested news of a ceasefire deal between Ukraine and pro-Russian rebels.
“Whether it is concerns about a slowing European economy impacting on demand, or today’s disappointing US jobs numbers, oil prices for Brent and WTI have remained under pressure today and look set to remain weak,” said CMC Markets analyst Michael Hewson.
The oil market began the week on a subdued note on Monday with US traders away for the Labor Day public holiday.
Prices pushed lower Tuesday as disappointing manufacturing data sparked concern over demand from top energy consumer China as well as Europe. Crude futures then rebounded on Wednesday on hopes of resurgent demand amid reports of a Ukraine ceasefire deal.
WTI gained $2.66 on Wednesday, recovering from a more than $3 drop the prior day, as Russian President Vladimir Putin unveiled a peace plan for Ukraine to end the months-long conflict that has claimed some 2,600 lives.
Brent jumped $2.43 after sliding the previous day to its lowest level since May 2013. Oil prices then fell Thursday as the dollar raced higher following the surprise ECB news.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in October fell to $101.29 a barrel from $102.89 one week earlier. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for October slid to $94.05 per barrel compared with $95.40.
PRECIOUS METALS : Gold dived to a 2.5-month low of $1,257.39 per ounce, rocked by the strong dollar and falling safe-haven demand.
“The price of gold fell sharply on Thursday as the US currency appreciated … in response to the ECB’s surprise easing measures,” said Forex.com analyst Fawad Razaqzada.
Easing Ukraine concerns meanwhile dimmed demand for gold as a haven investment.
By Friday on the London Bullion Market, the price of gold sank to $1,266 per ounce from $1,285.75 a week earlier. Silver eased to $19.13 an ounce from $19.47.
On the London Platinum and Palladium Market, platinum gained to $1,406 per ounce from $1,424.
Palladium climbed to $887 an ounce from $898.
BASE METALS : Base or industrial metal prices mostly declined, but nickel rose on the back of a possible exports ban in the Philippines.
“Nickel was… bolstered by the news that a Philippine senator has urged a ban on exports of unprocessed nickel ore,” said Triland Metals analysts.
“This would mirror a similar law which came into force in Indonesia earlier this year and which was largely responsible for a 40-percent rise in nickel prices.”
By Friday on the London Metal Exchange, copper for delivery in three months slid to $6,932.75 a tonne from $6,960 a week earlier.
Three-month aluminum reversed to $2,098 per tonne from $2,101.
Three-month lead dipped to $2,209.25 a tonne from $2,245.
Three-month tin dropped to $21,390 a tonne from $21,877.
Three-month nickel increased to $19,460 per tonne from $18,565.
Three-month zinc rose to $2,395 a tonne from $2,349.
COCOA : Prices fell, having struck a three-year peak in New York the previous week, as traders fretted over the prospect of a surplus.
“Cocoa prices came under pressure,” noted Commerzbank analysts.
“This is because the International Cocoa Organization (ICCO) now envisages a supply surplus of 40,000 tonnes on the global cocoa market for the now ending 2013/14 crop year — previously it had predicted a supply deficit to the tune of 75,000 tons.”
By Friday on LIFFE, London’s futures exchange, cocoa for delivery in December slid to 1,999 pounds a ton compared with 2,037 pounds a week earlier. On the ICE Futures US exchange, cocoa for December dropped to $3,130 a ton from $3,234 a week earlier.
COFFEE : Prices bucked the downward trend to strike one-month highs on renewed supply concerns in leading producer Brazil.
By Friday on ICE Futures US, Arabica for delivery in December eased to 200.50 US cents a pound compared with 200.80 cents a week earlier.
On LIFFE, Robusta for November reached $2,086 per ton compared with $2,049 a week earlier.