Most commodities struggled this week, with many striking multi-month lows, as investors eyed the strong dollar and the eurozone debt crisis that is plaguing Greece and threatening Spain, traders said. At the same time, a slew of recent bleak data has sparked fears that China's economy - a key consumer of many raw materials - is cooling faster than previously thought.
"Commodities prices have posted broad-based and widespread declines this week as euro-area politics remain the focus for markets," said Barclays Capital analyst Sudakshina Unnikrishnan. "A resurgence of sovereign debt fears has accompanied Greece's failure to form a government and an apparent wider European shift in political rhetoric away from austerity.
"Crude oil markets remain under pressure, spurred by heightened political uncertainty in Europe (and) soft Chinese data." The European single currency tumbled as low as $1.2642 on Friday to reach a level last seen on January 16, on mounting concerns that Greece could exit the eurozone. The strong greenback makes dollar-priced commodities more expensive for buyers using weaker currencies. That tends to sap demand and pull prices lower.
OIL: World oil prices fell sharply as the market was rattled once again by concern about the weak demand outlook arising from the eurozone crisis and the faltering US economy. "The oil market continues to remain under pressure following the fragile economic conditions in the eurozone and the lack of oil demand from the United States," added Sucden analyst Myrto Sokou told AFP.
Brent North Sea crude struck $106.40 per barrel on Friday, touching the lowest point since December 21. New York's light sweet crude sank to $91.60 a barrel, hitting the lowest level since November 3. Prices have fallen considerably after soaring on the back of Middle East tensions earlier this year.
In Greece, meanwhile, a caretaker technocrat government took office on Thursday to organise the debt-plagued nation's second elections in just six weeks after an inconclusive May 6 vote. The polls left Greece in limbo, pushing the financial markets and euro down sharply, and the new election on June 17 offers no guarantee of a viable government able to implement an EU-IMF bailout that has divided the country.
Meanwhile, Moody's has slashed the ratings of 16 banks in Spain by between one and three notches, citing "renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment". It also blamed the reduced creditworthiness of the government. Fitch also downgraded Greece's credit a notch, to CCC from B-, saying it was vulnerable to default amid political uncertainty over Athens's commitment to a crucial bailout plan and its possible exit from the eurozone.
Investor sentiment was also dampened by key producer Saudi Arabia's call for crude prices to fall further. By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in July slumped to $107.40 a barrel from $112.46 for the June contract a week earlier. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for June tumbled to $92.20 from $96.75.
PRECIOUS METALS: Gold dived to a four-month trough at $1,526.97 an ounce but ended the week in positive territory as investors sought a safe-haven investment. "Prices bounced across the complex (on Thursday), following the weak start to the week, as equity markets remained under pressure and uncertainty over Europe heightened," said Barclays Capital analysts.
By late Friday on the London Bullion Market, gold had risen to $1,589.50 an ounce from $1,583 a week earlier. Silver declined to $28.48 an ounce from $28.58. On the London Platinum and Palladium Market, platinum fell to $1,456 an ounce from $1,466. Palladium was unchanged at $605 an ounce.
BASE METALS: Prices mainly fell, with aluminium, copper and nickel hitting their lowest levels in more than four months amid the broader sell-off on global financial markets. "Weak equity markets and in particular the continuing very firm US dollar have so far prevented any significant recovery in metal prices," said Commerzbank analysts in a research note.
"Investors remain very risk-averse given the political uncertainties in the eurozone. However, the low price levels of many metals are now obviously regarded as providing attractive entry opportunities, preventing any steeper price decline so far." By late Friday on the London Metal Exchange, copper for delivery in three months dropped to $7,716 a tonne from $7,992 a week earlier.
----- Three-month aluminium rose to $2,059 a tonne from $2,038.
----- Three-month lead slipped to $1,964 a tonne from $2,065.
----- Three-month tin slid to $19,332 a tonne from $20,300.
----- Three-month nickel increased to $17,153 a tonne from $17,057.
----- Three-month zinc sank to $1,915 a tonne from $1,931.
COCOA: Cocoa futures slipped to two-week lows. By Friday on Liffe, London's futures exchange, cocoa for delivery in July dipped to £1,532 a tonne from £1,534 a week earlier. In New York on the NYBOT-ICE, cocoa for July declined to $2,238 a tonne from $2,315.
COFFEE: Coffee prices bucked the downward trend to post impressive gains, hitting the highest level since September 2011 in London, as speculators ploughed into the market. By Friday on NYBOT-ICE, Arabica for delivery in July rose to 179.95 US cents a pound from 176.35 cents a week earlier. On Liffe, Robusta for delivery in July climbed to $2,197 a tonne from $2,101.
SUGAR: Sugar slid to fresh 20-month lows on expectations of a big global surplus, but also finished the week with slender gains. "Prices remain under pressure from the growing global 2011-12 surplus and expectations of additional exports from India," said Barclays Capital analyst Kate Tang. By Friday on Liffe, the price of a tonne of white sugar for delivery in August gained to $573 from $553.60 a week earlier. On NYBOT-ICE, the price of unrefined sugar for July firmed to 20.71 US cents a pound from 20.31 cents.
RUBBER: Prices retreated after weak economic data from China, the world's biggest rubber user, sparked concerns over weak demand. By Friday, the Malaysian Rubber Board's benchmark SMR20 dropped to 326.25 US cents a kilo from 348.45 cents the previous week.
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