Gold tumbles most in a week since May; oil down too

NEW YORK: Gold prices suffered their sharpest weekly loss in nine months on Friday after crashing through key support levels, and oil and copper fell after a surprise drop in US industrial output sparked concerns about recovery in the world's largest economy.

Agricultural markets halted a selling spree as grains prices inched higher, although corn, wheat and soybeans still ended lower on the week.

Raw sugar, arabica coffee and cocoa also looked vulnerable to a sharper downside in coming sessions after tumbling most of the week, traders said.

Analysts said a sturdy dollar limited the potential for a commodities rebound as raw materials priced in the greenback became less appealing to buyers holding other currencies.

The dollar hit a three-week high against the euro and extended gains against the yen as G20 officials struggled to find common language on currency manipulation ahead of a summit in Moscow later on Friday.

The Thomson Reuters-Jefferies CRB index, a global commodities bellwether, was down 0.4 percent on the day and nearly 1 percent on the week. Ten of the 19 commodity markets tracked by the CRB were down, with gold, silver and US crude oil all losing about 2 percent each.

GOLD CRASHES BELOW SUPPORT

Gold broke below two key support levels -- $1,625 and $1,600 -- to hit lows last seen in August.

The spot gold price of gold sunk to an intraday low of $1,598.04 an ounce, its weakest since Aug. 16, before recovering to above $1,605.

The 2 percent drop for the session marked gold's sharpest one-day loss since November. The 4 percent slide on the week made it the deepest weekly loss since May.

"The 1,625 level was a big support and once that was broken, stop-selling orders kicked off and now we are in a new range of $1,550 to $1,625," said Adrien Biondi, head of precious metals trading at Commerzbank.

Sell-stops are automatic technical selling signals that start when prices break through certain support levels. They are set up in such a way to allow traders to limit losses in a falling market.

While the dollar's strength was certainly to blame for some of gold's decline on Friday, the shiny metal also suffered from a dearth of physical demand from Chinese buyers away this week for the Lunar New Year holiday, traders said.

OIL DOWN ON US ECONOMIC DATA

In oil, London's Brent crude closed at $117.66 a barrel, down 0.3 percent on the day and 1 percent on the week.

US crude's front-month contract settled at $95.86, down $1.45, or 1.5 percent, for the session. It was up slightly on the week.

"We gave (US) oil many chances to get above $98 and test $100 a barrel. And it becomes a situation where we can't rally, so we sell it," said Richard Ilczyszyn, chief market strategist at iitrader.com LLC in Chicago.

The sell-off came as US industrial production dipped 0.1 percent last month after a revised 0.4 percent gain in December. Economists had been expecting a modest increase in industrial output in January.

COPPER SLIPS BUT EYES CHINA DEMAND

In copper, the three-month benchmark contract in London closed at $8,207 per tonne from a last bid of $8,237 on Thursday.

Used in construction to power generation and often regarded the price-setter for base metals, copper has lately been outperformed by aluminum and zinc - two other widely-used metals.

"Aluminium wasn't doing much ... and probably people thought it was time for a catch-up," said Stephen Briggs, a metals strategist at BNP Paribas in London. "In zinc, it's hard yet to get enthusiastic about the fundamentals, so that rally looks a little overdone."

Some are optimistic for a rebound in copper demand when Chinese buyers return from their holiday next week. China is the world's largest copper consumer.

"Right now, demand for copper is only coming from China and the US because Europe is a mess," said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.