Commodity prices were mixed this week following volatile trading as dealers weighed the effects of new US stimulus measures against fears over weaker Chinese demand. Raw materials futures had surged the previous week after the Federal Reserve had said it would start a third stimulus programme - known more commonly as quantitative easing (QE3) - that will purchase $40-billion per month in mortgage-backed bonds.
OIL: Crude futures tumbled on weak demand expectations and the prospect of increased supplies. "The recent decline in oil prices supports our view that a third round of quantitative easing from the US Fed is unlikely to cause global inflation to take off," said Julian Jessop, chief economist at Capital Economics research group.
"Unfortunately, the boost to economic activity from additional monetary stimulus probably won't be very large either." Oil prices plunged about 10 dollars a barrel since the start of the week up until Thursday, when they began to rebound. Futures tumbled, with Brent closing down almost four dollars Wednesday, on talk that Saudi Arabia was boosting crude supplies. Losses were extended owing to the prospect of weaker energy demand by China, traders said.
Analysts said recent price support won from the US Federal Reserve's decision last week to embark on a third round of exceptional stimulus measures, had tailed off. Saudi oil minister Ali al-Naimi said earlier this month that prices were too high, amid fears that expensive energy would undermine attempts to boost global economic growth.
The Saudi position was rekindled on Wednesday after the Financial Times said that the world's biggest oil exporter had been offering customers extra supplies. Crude demand worries were meanwhile stoked after British banking giant HSBC released data Thursday showing China's manufacturing sector still stuck in a rut.
Trader sentiment was lifted slightly on Friday by "rumours that the Spanish might be about to put on the table terms of a bailout", said Jason Hughes, head of premium client management for trading group IG Markets in Singapore. "We're finally getting to the point in time where it looks like they're going to finally come up with a proposal for actually receiving a bailout of some sort," he told AFP.
A Financial Times report on Friday said EU authorities were working behind the scenes to prepare the ground for a new rescue programme and unlimited bond buying by the European Central Bank for debt-hit Spain, which would be unveiled next week. By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in November slumped to $110.37 a barrel from $116.68 a week earlier. On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for November stood at $93.09 a barrel compared with $98.87 for the expired October contract a week earlier.
PRECIOUS METALS: Gold prices hit the highest level for seven months at $1,787.52 an ounce on Friday as investors piled into the metal viewed as a haven investment amid higher inflation prospects caused by stimulus measures. Sister metal silver followed in gold's wake, reaching a six-month peak of $35.17 an ounce.
"Recent gains in the gold price have been comparable to the appreciation in the gold price immediately following QE1 and QE2," Deutsche Bank analysts said. "In fact if gold prices continue to track what happened in those episodes, it implies gold prices hitting $1,900 per ounce by the end of October." Meanwhile top gold producer AngloGold Ashanti on Friday said it had been hit by a wildcat strike in the latest disruption to South Africa's key mining sector after protests at other platinum and gold mines.
The stayaway at the Kopanang mine, around 180 kilometres (112.5 miles) south-west of Johannesburg, came as platinum giant Anglo American Platinum and Gold Fields battled to get thousands of their own striking workers to return. Miners around the country acted after a wage settlement at platinum producer Lonmin, whose workers returned to work Thursday after winning pay hikes of up to 22 percent after a deadly six-week stand-off that lifted platinum prices.
"The strike was not expected," National Union of Mineworkers spokesman Lesiba Seshoka. "But I think in one way or other we have come to expect similar protests, especially after the precedent that was set by Marikana with Lonmin acceding to the demands that were put forward." By late Friday on the London Bullion Market, gold gained to $1,784.50 an ounce from $1,775.50 a week earlier. Silver dipped to $34.69 an ounce from $34.71. On the London Platinum and Palladium Market, platinum decreased to $1,642 an ounce from $1,697. Palladium slid to $672 an ounce from $702.
BASE METALS: Base or industrial metals came off multi-month highs. "The metals are reflecting the general correction in the financial markets," said analyst James Moore at data provider Fast Markets. "Despite the prospect of further cheap money from the world's central banks the metals are undergoing a much need phase of consolidation following the strong rallies posted over the past couple of weeks."
Moore said he expected prices to remain "volatile, particularly towards the eurozone as leaders have yet to tackle the structural issues facing the region." By late Friday on the London Metal Exchange, copper for delivery in three months slid to $8,283 a tonne from $8,399 a week earlier.
----- Three-month aluminium dropped to $2,106 a tonne from $2,190.
----- Three-month lead gained to $2,283 a tonne from $2,254.
----- Three-month tin slipped to $20,825 a tonne from $21,350.
----- Three-month nickel grew to $18,086 a tonne from $17,640.
----- Three-month zinc advanced to $2,124 a tonne from $2,110.
COCOA: Prices fell heavily "as the stronger US dollar put downward pressure on values," said trade publication the Public Ledger. "Futures also fell because global economic concerns had investors shying away from riskier commodities." A stronger US currency makes dollar-denominated raw materials like cocoa more expensive for buyers holding weaker rival currencies, denting demand. By Friday on Liffe, London's futures exchange, cocoa for delivery in December dropped to £1,613 a tonne from £1,695 a week earlier. On New York's NYBOT-ICE exchange, cocoa for December slumped to $2,509 a tonne from $2,634.
SUGAR: Sugar futures "came under pressure from various sides," said Commerzbank in a note to clients. "For one thing, the now rapid progress made by the harvest in Brazil is weighing on prices. What is more, the El Nino phenomenon is now expected to be fairly mild and unlikely to result in any major disruptions on the sugar market.
"The crop season in China, which begins in October, is also expected to produce the second-highest sugar yield of all time... One of the few supporting factors in recent times was the poor monsoon season in India, yet even here rainfall appears to be improving the situation," the bank added. By Friday on NYBOT-ICE, the price of unrefined sugar for March stood at 20.30 US cents a pound compared with 19.94 cents for the October contract a week earlier. On Liffe, the price of a tonne of white sugar for delivery in December slipped to $567 from $574.30 a week earlier.
COFFEE: Coffee futures retreated largely on expectations of heavy rainfall in Brazil, dealers said. By Friday on NYBOT-ICE, Arabica for delivery in December slid to 171 US cents a pound from 181.35 cents a week earlier. On Liffe, Robusta for November decreased to $2,060 a tonne from $2,099.
RUBBER: Prices rose further on expectations of rising demand from China, the world's biggest buyer of rubber, dealers said. The Malaysian Rubber Board's benchmark SMR20 climbed to 286.35 US cents a kilo from 275.95 cents the previous week.
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