Most commodities, led by crude oil, rallied this week as investors returned to the market amid expectations that the US Federal Reserve could soon end its policy of hiking interest rates. Crude oil futures raced to record high points above 75 dollars per barrel amid strong global demand and persistent geopolitical tensions in North Korea and Iran.
"Global concerns continue to dominate," noted Helen Henton, head of commodity research at emerging markets bank Standard Chartered. The prospect of a pause in US interest rate hikes from the current 5.25 percent "restored some confidence in the bullish commodity story" of upwards price momentum, she added.
Higher borrowing costs weigh more on economic growth and demand. Prior to the past fortnight, many commodities had plummeted since the middle of May, as investors had seized on worries over higher interest rates to combat rising inflation.
On Friday, the Commodities Research Bureau's index of 17 commodities stood at 352.95 points, from 344.13 points the previous week.
GOLD: Gold prices climbed to a one-month peak. The price of gold hit 637.49 dollars on Friday, its highest level since July 6, but was still 13 percent beneath its 26-year summit of 730.40 dollars reached in May.
"Gold jumped higher as traders reacted to the North Korea missile launch reports," said James Moore, analyst for specialist website TheBullionDesk.com.
North Korea on Wednesday provoked international outrage when it test-fired seven missiles, including a new long-range Taepodong-2 which could theoretically reach US soil. "Global tensions look set to provide further upside momentum as investors continue to be drawn towards gold's safe-haven qualities," Moore added.
On the London Bullion Market, gold prices jumped to 631.50 dollars per ounce at Friday's late fixing, from 613.50 dollars a week earlier.
SILVER: Silver prices rose on the coattails of gold. The price of silver reached 11.64 dollars on Friday, which was last seen on June 8, but remained far below its 26-year high of 15.22 dollars, reached on May 11. "Silver looked towards gold and copper for direction," Moore added.
On the London Bullion Market, silver prices climbed to 11.51 dollars per ounce at Friday's fixing, from 10.70 dollars the previous week.
PALLADIUM AND PLATINUM: Platinum and palladium made in-roads this week, supported by strong demand from the automobile and jewellery sectors.
"US car buyers are increasingly looking towards vehicles that offer improved fuel economy, which could ultimately result in higher platinum demand," Deutsche Bank analysts said. Platinum is used in catalytic converters. Palladium was meanwhile aided by increased jewellery demand from China. In Friday trading on the London Platinum and Palladium Market, platinum rose to 1,230 dollars per ounce at the late fixing, from 1,226 dollars the previous week.
Palladium increased to 323 dollars per ounce on Friday from 312 dollars the previous week.
BASE METALS: Most base metals prices advanced, with nickel striking a historic peak above 24,000 dollars per tonne - the highest point since it was first listed in 1979. In Friday trading on the London Metal Exchange (LME), three-month nickel prices hit 24,100 dollars per tonne, beating their previous all-time high of 23,075 dollars reached on July 5.
The price of nickel, a metal used to help prevent corrosion, has surged by 77 percent since the start of 2006 - rising in line with other metals amid tight supplies and keen demand. Most other base metals also bounded higher, lifted by keen investment fund buying and low global stockpiles.
"Copper, nickel and zinc remained underpinned by very low inventory levels on the LME in contrast to aluminium where stockpiles have not significantly changed," UBS analyst Robin Bhar said. On Friday, three-month copper prices on the LME climbed to 7,711 dollars per tonne from 7,431 dollars the previous week.
Three-month aluminium prices eased to 2,567 dollars per tonne from 2,596 dollars.
Three-month nickel prices soared to 23,675 dollars per tonne from 21,250 dollars.
Three-month lead prices rose to 1,030 dollars per tonne from 992 dollars.
Three-month zinc prices advanced to 3,382 dollars per tonne from 3,260 dollars.
Three-month tin prices surged to 8,755 dollars per tonne from 8,080 dollars.
OIL: Crude oil prices hit all-time peaks above 75 dollars per barrel in London and New York on Friday owing to signs of strong global demand and simmering geopolitical tensions,.
New York's main contract, light sweet crude for delivery in August, soared to a new record high of 75.70 dollars per barrel. Friday's record run saw New York crude beat Wednesday's historic peak of 75.40 dollars, reached as news emerged of North Korea's series of missile tests. In London on Friday, Brent North Sea crude for August delivery hit a historic high 75.03 dollars, beating an all-time record of 74.94 dollars achieved on May 2.
"I am sure we'll see over 80 this year," Investec analyst Bruce Evers said.
Crude prices could hit 100 dollars per barrel "if Iran refuses to cooperate with the States and there is a major hurricane over the producing area of the Gulf of Mexico", he added. At the start of 2005, crude oil stood at around 40 dollars per barrel - and was just 20 dollars per barrel at the beginning of 2002.
Adjusted for inflation, current prices nonetheless remain below levels reached after the 1979 Iranian revolution. "We're coming into the main hurricane season, you've got Iran being difficult, you've got North Korea refusing to behave itself," Evers added.
Traders were tracking events in North Korea, whose recent actions helped stoke international global tensions and lift oil prices, despite the country not being a producer of crude. Elsewhere, the international standoff over the Iranian nuclear energy crisis continued to plague the market. Analysts argue that any sanctions might lead to severe disruptions to the Middle Eastern nation's crude exports.
At about 1600 GMT on Friday in New York, a barrel of crude for delivery in August rocketed to 75.20 dollars per barrel from 73.90 dollars the previous week.
In London, a barrel of Brent North Sea crude for delivery in August jumped to 74.60 dollars per barrel, from 73.16 dollars.
RUBBER: Rubber prices slipped as funds were switched into crude oil and the metals complex. "Prices started up on Monday and have since then been drifting lower," said Corrie Maccoll analyst Rashid Ahmed. "We saw some (traders) taking profits... to fund some other investments in metals and energy."
On TOCOM, Tokyo's commodity exchange, natural rubber for October delivery fell to 295.40 yen per kilogramme on Friday, from 306.70 yen a week earlier. Singapore's RSS 3 October contract slid to 254.75 US cents per kilogramme on Friday, from 263 cents a week earlier.
COCOA: Cocoa prices in London struck the highest point for a year and a half on speculative buying. The price of cocoa for September delivery reached 996 pounds per tonne on Thursday, the highest level since November 2004. "Fund interest in cocoa has been stimulated by talk of crop disease in Côte d'Ivoire (Ivory Coast) and flood damage to the mid-crop in Indonesia," Standard Chartered analyst Helen Henton said.
On the Liffe, London's futures exchange, the price of cocoa for September delivery rose to 988 pounds per tonne on Friday, from 955 pounds a week earlier. On the New York Board of Trade (NYBoT), the September contract advanced to 1,726 dollars per tonne on Friday, from 1,635 dollars a week earlier.
COFFEE: Coffee prices hit the best level since the start of 2006 in London and a month-high in New York on supply and weather concerns. On Friday, Robusta quality for September delivery struck 1,340 dollars per tonne, a level last seen at the beginning of the year, owing to falling stocks, according to Standard Chartered's Henton. Prices later fell on profit-taking.
In New York, Arabica for September delivery climbed above 100 US cents per pound, which was the best level for a month. Support came from cooler temperatures in Brazil.
"However unless we see any real prospect of frost damage to the Brazilian crop the market is likely to head lower again on the prospect of a bumper 2006/07 crop in Brazil," Sucden analyst Michael Davies said.
On Liffe, Robusta quality for September delivery rose to 1,326 dollars per tonne on Friday, from 1,220 dollars a week earlier. On NYBoT, Arabica for September delivery increased to 103.10 US cents per pound on Friday, from 99.10 cents.
SUGAR: Sugar prices matched a record high in London as India tightened supplies. In London on Thursday, the price of a tonne of white sugar for August delivery hit 497 dollars per tonne, equalling the historic peak set on May 12. "Sugar was lifted by news that India has extended a general ban on the export of refined sugar, until the end of the financial year in March 2007 to keep domestic prices in check," Sucden analysts said.
Prices were supported also by soaring crude oil prices. Sugar cane is used in the manufacture of ethanol, a cheaper alternative to gasoline, which is refined from crude oil. On Liffe, the price of a tonne of white sugar for October delivery climbed to 483 dollars, from 463.20 dollars a week earlier. On NYBot, the price of unrefined sugar for October delivery gained to 17.31 US cents per pound, from 16.34 cents.
GRAINS AND SOYA: Grains and soya prices advanced owing to dry weather in the United States, which could lead to small harvests. AG Edwards analyst Victor Lespinasse said weather was the only factor currently influencing prices. On the Chicago Board of Trade, the price of wheat for September delivery rose to 4.03 US dollars per bushel on Friday, from 3.96 dollars a week earlier. Maize for September delivery gained to 2.51 dollars per bushel on Friday, from 2.46 dollars.
August-dated soyabean meal - used in animal feed - climbed to 6.06 dollars per tonne on Friday, from 6.00 dollars. On the Liffe, the price of a tonne of wheat for November delivery increased to 76.75 pounds on Friday, from 75.25 pounds.
COTTON: Cotton prices fell further owing to high output. "Cotton prices have been driven down by high plantings in the US," said Henton of Standard Chartered. On the New York Cotton Exchange (NYCE), the October contract dropped to 51.15 US cents per pound on Friday, from 51.95 a week earlier. The Cotton Outlook Index of physical cotton dipped to 54.10 US cents on Thursday, from 54.15 US cents a week earlier.
WOOL: Wool prices steadied at the start of the 2006/07 season in leading producer Australia. "The week finished on a firm note after a slight easing at the beginning of the week," the Australian Wool Industries Secretariat said. The Australian Eastern index closed at 7.49 Australian dollars per kilo on Thursday, unchanged from a week earlier. The British Wooltops index stood at 398 pence on Thursday, unchanged for the third week running.
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