Oil prices slid further last week on widespread fears of a US-led economic slowdown, which also pushed gold prices to new record highs above 900 dollars an ounce. US President George W. Bush called Friday for Congress to act quickly on a stimulus plan worth around 140 billion dollars to revive an economy that some fear is on the brink of recession.
The announcement came amid a growing consensus on the need to enact a plan to help stave off an economic downturn with a program based on tax rebates and breaks for businesses. "President Bush's economy boost was viewed positively by economists and could potentially stop the US slipping in to recession," said James Moore, analyst at TheBullionDesk.com.
OIL: This week oil prices fell further from recent record highs of above 100 dollars amid concerns about a possible drop in energy demand if the United States does go into recession. Oil tumbled under 90 dollars a barrel for the first time in a month. "The drop in (oil) demand is certain in the short term with the economic slowdown in the United States affecting sentiments worldwide," said Tony Nunan, of Mitsubishi Corp's international petroleum business.
"Everyone stops spending and that will drive prices further down," he said. Trading was volatile and in a "worst-case scenario" prices could fall as low as 69 dollars, he said. "I can see prices dropping to the lower 80s or even the higher 70s as we move towards the end of the first quarter," Nunan added.
Phil Flynn, an analyst at Alaron Trading, said: "If the US falls into recession and China slows down, we could be headed for one of the most significant corrections of this decade in oil." Prices remain at high levels but have shed more than 10 dollars since striking a record in New York of 100.09 dollars per barrel in early January.
They tumbled Wednesday in reaction to a report of an increase in US crude reserves and after George W. Bush called on Opec members to hike output. A day earlier Bush voiced concern about high prices as he met King Abudullah of Saudi Arabia - the world's biggest oil producer - during a tour of the Middle East. Traders are looking ahead to the February 1 meeting of the Organisation of the Petroleum Exporting Countries in Vienna.
On Wednesday, the International Energy Agency kept its 2008 forecast for oil demand unchanged despite growing expectations of a US recession. On Friday, New York's main oil futures contract, light sweet crude for delivery in February, dropped to 91 dollars per barrel from 93.20 dollars a week earlier. Brent North Sea crude for March fell to 89.70 dollars, compared with 91.11 dollars for the February contract a week earlier.
GOLD/SILVER: Gold prices jumped Monday to a record high 914.30 dollars against a backdrop of a struggling dollar and global economic woes stemming from problems in the United States. Silver prices struck a 27-year high of 16.60 dollars an ounce as the precious metal also benefited from the weak dollar.
Towards the end of the week, prices were lower as profit-taking set in. Gold could strike 1,000 dollars an ounce in 2008 after the recent record-breaking run that was driven by fierce investment demand, precious metals consultancy GFMS said. "Investor appetite for gold at the moment seems undimmed and this should push gold higher over the year," GFMS chairman Philip Klapwijk said as the independent research group published its annual Gold Survey.
"Predicting the top is never easy but we always thought the 900-dollar barrier could easily fall quite soon and then we have to start viewing 1,000 dollars as a clear possibility for later this year." The weak dollar encourages demand for gold because it makes the precious metal cheaper for buyers using stronger currencies.
Economic and geopolitical turmoil, meanwhile, attracts investors to gold because the metal is regarded as a safe-haven. It also guards against rising inflation caused largely by soaring crude oil prices. On the London Bullion Market, gold dipped to 882 dollars at Friday's late fixing, up from 891 dollars a week earlier. Silver fell to 15.82 dollars an ounce from 16.06 dollars.
PLATINUM/PALLADIUM: Platinum hit an all-time peak of 1,592 dollars per ounce on Monday, before hitting reverse gear on profit-taking. "The precious metals remained in a choppy mood ... but the overall theme was one of consolidation," said Moore at TheBullionDesk.com. In recent weeks, platinum has witnessed record gains on the back of the weak dollar and tight supplies.
On the London Platinum and Palladium Market, platinum eased to 1,560 dollars an ounce at the late fixing Friday from 1,565 dollars a week earlier. Palladium slipped to 360 dollars an ounce from 376 dollars.
BASE METALS: Base metals price were mixed as traders monitored growing recession fears for the US economy. On Friday, copper for delivery in three months fell to 7,100 dollars a tonne on the London Metal Exchange from 7,230 dollars a week earlier. Three-month aluminium slid to 2,447 dollars a tonne from 2,475 dollars.
Three-month nickel firmed to 28,075 dollars a tonne from 28,050 dollars. Three-month lead edged up to 2,580 dollars a tonne from 2,575 dollars. Three-month zinc declined to 2,320 dollars a tonne from 2,370 dollars. Three-month tin increased to 16,475 dollars a tonne from 16,300 dollars.
COCOA: Cocoa prices hit fresh multi-year peaks amid persistent supply-side concerns in leading producer the Ivory Coast but ended the week on a subdued note. By Friday on the Liffe, London's futures exchange, the price of cocoa for March delivery declined to 1,111 pounds a tonne from 1,127 pounds a week earlier. On the New York Board of Trade (NYBOT), the March cocoa contract decreased to 2,134 dollars a tonne from 2,170 dollars.
COFFEE: Coffee slipped as traders cashed in gains after prices had hit a nine-year high in London the previous week. "Having re-tested the 2,041-dollar high a couple of days ago, London coffee has backed off and feels tired," Sucden analysts said. By Friday on the Liffe, Robusta quality for March delivery sank to 1,900 dollars a tonne from 2,032 dollars a week earlier. On the NYBOT, Arabica for March delivery eased to 134.10 US cents a pound from 136.75 cents.
SUGAR: Sugar flew higher as the commodity drew strength from demand for ethanol, the biofuel alternative for motor fuel. By Friday on the Liffe, the price per tonne of white sugar for March delivery rose to 345.20 pounds from 331 pounds a week earlier. On the NYBOT, the price of unrefined sugar for March delivery gained to 12.23 US cents a pound from 11.54 cents.
GRAINS AND SOYA: Soya headed lower after breaching 13 dollars for the first time the previous week. By Friday on the Chicago Board of Trade, March-dated soyabean meal - used in animal feed - was at 12.57 dollars, down from 12.98 dollars.
The price of maize for March delivery rose to 4.98 dollars a bushel from 4.95 dollars a week earlier. Wheat for March delivery rose to 9.27 dollars a bushel from 9.09 dollars. On Liffe, the price per tonne of wheat for May delivery rose to 183.50 pounds from 181 pounds a week earlier.
RUBBER: Rubber prices fell as Chinese buyers were scared off by the high cost of the commodity. "High prices are driving major buyers from China to remain on the sidelines," said a dealer with a local brokerage in Malaysia. On Friday, the Malaysian Rubber Board's benchmark SMR20 fell to 251.40 US cents per kilogramme from 259.00 US cents the previous week.
WOOL: Wool prices rose in major producer Australia. "It was another good week," the Australian Wool Industries Secretariat said. The Eastern Index gained to 10.36 Australian dollars a kilo, from 10.28 Australian dollars a week earlier.
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