Commodities mostly fell in volatile trade this week as investors tracked sharp swings in global equities and the US dollar and news that the United States has escaped from recession. Official data showed Thursday that the US economy emerged from a vicious recession in the third quarter, following France, Germany and Japan out of the worst downturn since the 1930s.
Many analysts noted that the expansion was mainly due to exceptional government measures to stimulate growth that would eventually expire. At the same time, markets were rattled on Friday by data showing that US consumer spending, a critical growth driver, fell for the first time in five months in September. Household spending decreased 47.2 billion dollars or 0.5 percent last month, as expected by most economists, the Commerce Department said. It was the biggest drop since December 2008.
"The US GDP figures on Thursday certainly helped to settle some nerves but it is being increasingly evident that investors are going to need further proof of the strength of any economic recovery before they return to the market with full vigour," said City Index analyst Joshua Raymond.
OIL: World oil prices dived Friday on profit-taking, mirroring losses on global stock markets, after surging the previous day on news that the US has bounced out of recession. "Crude prices slid back below 80 dollars a barrel amid profit-taking, following impressive gains on the back of positive US data, as concerns over poor fundamentals (of supply and demand) continue to linger," said analysts at the Sucden brokerage in London.
Wall Street sank as the market digested a sharp rally the day before on the back of stronger-than-expected Gross Domestic Product (GDP) growth. The American economy grew 3.5 percent in the third quarter - its strongest growth in two years and the first since the second quarter of 2008. The figures, helped by multi-billion dollar stimulus measures from Washington, also beat analysts' consensus forecasts for 3.2-percent growth.
"Surprisingly good economic figures from the US... were the catalyst behind the increase" in oil prices on Thursday, said JBC Energy analysts. However, they also warned that "oil still looks to be overpriced and an increase in GDP after four quarters of decreases does not mean the US, or the rest of the world, is out of the woods yet". The US is the world's biggest energy consumer and the health of its economy and the consumption patterns of Americans are major influences.
Crude prices have tumbled from record highs above 147 dollars in July 2008 to around 30 dollars in December on falling demand due to the recession. They have since clawed back ground on mounting hopes of global economic recovery. Earlier this week, oil had plunged as the dollar rose against rival currencies, and amid expectations of easing violence in Nigeria, whose crude production has been ravaged by militant attacks in recent years.
The announcement last weekend of an "indefinite cease-fire" by militants in Nigeria partly allayed investor concerns over potential supply disruptions in the African country. Nigeria is the world's eighth-largest oil producer. The oil market also fell Wednesday as traders reacted to rising US crude and gasoline stockpiles and souring consumer confidence. Many traders have taken profits after New York crude had struck 82 dollars last week, its highest level since October 14, 2008, on the back of the weak US currency.
A struggling greenback makes dollar-priced oil cheaper for buyers holding stronger currencies, which stimulates demand and prices. The reverse tends to apply when the dollar strengthens. By Friday on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in December fell to 78.11 dollars, from 80.48 dollars a week earlier.
On London's InterContinental Exchange (ICE), Brent North Sea crude for December delivery dived to 76.38 dollars, compared with 78.91 dollars a week earlier.
PRECIOUS METALS: Gold prices fell as the dollar rose in value, dragging other previous metals lower, analysts said. The price of gold had hit an all-time high earlier this month at 1,070.80 dollars an ounce, before running into profit-taking.
"While the soft US dollar buoyed the gold price until mid-October to an all-time high, the rebound in the US currency has now placed gold under great pressure, causing short-term investors to take profits," said Commerzbank analyst Carsten Fritsch. By late Friday on the London Bullion Market, gold fell to 1,040 dollars an ounce from 1,061.75 dollars a week earlier. Silver slid to 16.57 dollars an ounce from 17.65 dollars.
On the London Platinum and Palladium Market, platinum declined to 1,320 dollars an ounce at the late fixing on Friday from 1,372 dollars. Palladium retreated to 324 dollars an ounce from 338 dollars.
BASE METALS: Base metals prices also ran into profit-taking as the dollar regained some strength, but losses were capped by the US growth data. "Prices surged sharply (on Thursday) as stronger-than-expected US GDP data bolstered broad market sentiment," said Barclays Capital analyst Nicholas Snowdon. By Friday on the London Metal Exchange, copper for delivery in three months fell to 6,620 dollars a tonne from 6,702 dollars a week earlier.
-- Three-month aluminium eased to 1,950 dollars a tonne from 1,990 dollars.
-- Three-month lead decreased to 2,347.5 dollars a tonne from 2,438 dollars.
-- Three-month tin slipped to 14,900 dollars a tonne from 15,300 dollars.
-- Three-month zinc slid to 2,220 dollars a tonne from 2,283 dollars.
-- Three-month nickel recoiled to 18,610 dollars a tonne from 19,530 dollars.
COCOA: Cocoa prices fell after striking a 24-year high at 2,193 pounds a tonne the previous week on prospects of a poor crop in top producer Ivory Coast. By Friday on Liffe, London's futures exchange, the price of cocoa for delivery in December dipped to 2,134 pounds a tonne from 2,184 pounds a week earlier. On the New York Board of Trade (NYBOT), the December cocoa contract sank to 3,333 dollars a tonne from 3,395 dollars.
SUGAR: Sugar slid further after the market had recently forged a 28-year pinnacle on the back of tight supplies. By Friday on Liffe, the price of a tonne of white sugar for delivery in March dropped to 584.30 pounds from 595 pounds a week earlier. On NYBOT, the price of unrefined sugar for March retreated to 22.62 US cents a pound from 23.02 cents.
GRAINS AND SOYA: Prices drifted lower after gains over the previous two weeks. "We are in a consolidation kind of phase right now," said Allendale analyst Joe Victor. By Friday on the Chicago Board of Trade, maize for delivery in December fell to 3.73 dollars a bushel from 3.97 dollars a week earlier. January-dated soyabean meal - used in animal feed - decreased to 9.77 dollars from 10.07 dollars. Wheat for December dipped to 4.96 dollars a bushel from 5.47 dollars.
COFFEE: Coffee prices edged ahead. By Friday on Liffe, Robusta for delivery in January firmed to 1,451 dollars a tonne from 1,427 dollars a week earlier. On the NYBOT, Arabica for December rose to 137.5 US cents a pound from 137 cents.
RUBBER: Malaysian rubber prices dropped in line with many other commodity markets. On Friday, the Malaysian Rubber Board's benchmark SMR20 fell to 231.95 US cents per kilo, from 232.90 cents last week.
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