Oil, gold, platinum and copper prices rocketed to record highs last week, boosted by weak supplies and fervent demand stemming from the weak dollar and the darkening US economic outlook, traders said.
Many investors sold their dollar and equity holdings in favour of commodities as they sought a safer investment to shelter from deepening recession worries in the United States, analysts said.
However, Sucden analyst Andrey Kryuchenkov sounded a warning about a possible correction in commodity markets. "Persistent economic fears and more risk aversion could trigger a correction in rallying crude prices or commodities in general, as investors still fear that a slower growth in the US could weigh on global growth estimates and dent demand for energy and other raw materials," Kryuchenkov said.
OIL: World oil prices surged to a fresh record high above 106 dollars per barrel on Friday, as investment funds ploughed into the market following fresh economic evidence pointing towards a US recession, analysts said. The market was also buoyed by the weak dollar, tumbling American crude reserves and Opec's decision to leave output unchanged, they added.
New York's light sweet crude hit a record 106.54 dollars and London's Brent North Sea oil struck an historic 103.98 dollars on Friday. The dollar slid to its lowest-ever level against the euro after news that US employers slashed payrolls by 63,000 jobs in February, in a sign of more struggles for the world's biggest economy and number one energy consumer.
"The debate is over. The 63,000 decline in non-farm payrolls in February is near conclusive proof that the economy is now in recession," said Capital Economics analyst Paul Ashworth.
The weak US currency encourages demand for dollar-priced commodities like oil because it makes them cheaper for buyers using other currencies. "The continued weakening in the US dollar against the euro meant that oil prices strengthened," wrote energy consultancy John Hall Associates in a note to clients.
Trade was also driven by a sharp and unexpected plunge in US crude reserves. The US Department of Energy announced Wednesday that American crude reserves tumbled by 3.1 million barrels in the week ending February 27. That snapped a seven-week run of gains and confounded market expectations for a gain of 2.4 million barrels.
In addition, the market faced pressure after the Opec oil exporters' cartel decided to hold output on Wednesday, shrugging off US demands to pump more oil and dampen soaring prices.
The Organisation of Petroleum Exporting Countries, which produces 40 percent of the world's oil, decided at an output policy meeting in Vienna to maintain its daily crude production target of 29.67 million barrels. Opec blamed the high cost of crude on speculative buying as investors sought a haven from rising inflation and a weak dollar.
Meanwhile, a small explosion at a military recruiting station in New York also boosted prices on Thursday. By Friday, New York's main oil futures contract, light sweet crude for delivery in April, soared to 105.42 dollars per barrel from 102.07 dollars a week earlier. Brent North Sea crude for April jumped to 102.85 dollars from 100.40 dollars.
GOLD AND SILVER: The price of gold forged a record high 992.50 dollars per ounce on Thursday, partly because of falling output from key producer South Africa. "Gold continues to shine as output losses add to its positive outlook," said analysts at Barclays Capital.
"Alongside, external price drivers such as continued dollar weakness, inflationary and recessionary fears, Fed rate easing and geopolitical tensions, supply losses are likely to support the upward trend in prices and we expect our longstanding target of 1,000 dollars to be realised very soon." Silver struck a fresh 27-year high in reaching 21.22 dollars per ounce.
On the London Bullion Market, gold climbed to 972.50 dollars per ounce at Friday's late fixing from 971.50 dollars a week earlier. Silver rose to 20.22 dollars per ounce from 19.62 dollars.
PLATINUM AND PALLADIUM: Platinum hit a new historic peak of 2,301.50 dollars per ounce, before pulling lower on profit-taking. "The impact of power shortages in South Africa have been played out most acutely in the platinum market, given South Africa is responsible for four-fifths of global mine production," Barclays Capital analysts said.
Platinum's sister metal palladium hit a six-year high of 595 dollars per ounce this week, before ending in negative territory. On the London Platinum and Palladium Market, platinum dipped to 2,082 dollars per ounce at the late fixing Friday from 2,150 dollars a week earlier. Palladium fell to 506 dollars per ounce from 568 dollars.
BASE METALS: The prices of copper and tin struck their highest ever peaks owing to the weak US dollar, dwindling supplies and keen demand. The price of copper, used for electrical wiring and plumbing, surged as high as 8,820 dollars per tonne, beating the previous record set in May 2006.
"An investment fund fuelled rally finally took the market above its previous high-point," said Basemetals.Com analyst William Adams. Stockpiles of copper, as tracked by the London Metal Exchange (LME), currently stand at their lowest level since October last year. Meanwhile on Tuesday, the price of tin reached 19,375 dollars per tonne - the highest point since 1989 when it was re-introduced on the London market.
"Supply problems stemming from the world's two largest producers, China and Indonesia as well as recent disruptions in Congo have supported (tin) prices," said Barclays Capital analysts. By Friday, copper for delivery in three months had climbed to 8,495 dollars per tonne on the London Metal Exchange from 8,492.50 dollars a week earlier.
-- Three-month aluminium rose to 3,198 dollars per tonne from 3,120 dollars.
-- Three-month nickel gained to 33,175 dollars per tonne from 31,905 dollars.
-- Three-month lead decreased to 3,090 dollars per tonne from 3,370 dollars.
-- Three-month zinc slid to 2,630 dollars per tonne from 2,750.15 dollars.
-- Three-month tin soared to 19,299 dollars per tonne from 18,711.50 dollars.
GRAINS AND SOYA: Soya and maize prices hit all-time records on the back of rocketing crnne of wheat for November delivery was unchanged at 158.75 pounds from a week earlier.
COCOA: Cocoa prices enjoyed more multi-year peaks in London and New York, before traders opted to cash in their gains. By Friday on Liffe, London's futures exchange, the price of cocoa for May delivery slid to 1,394 pounds per tonne from 1,425 pounds a week earlier. On the New York Board of Trade (NYBOT), the May cocoa contract sank to 2,507 dollars per tonne from 2,779 dollars a week earlier.
COFFEE: Coffee prices also hit multi-year peaks before losing ground towards the end of the week on profit-taking. By Friday on Liffe, Robusta for May delivery fell to 2,507 dollars per tonne from 2,770 dollars a week earlier. On the NYBOT, Arabica for May delivery decreased to 149.90 US cents per pound from 167.55 cents.
SUGAR: Sugar prices breached 400 pounds per tonne in London before tailing off. By Friday on Liffe, the price per tonne of white sugar for May delivery fell to 349 pounds from 386 pounds a week earlier. On NYBOT, the price of unrefined sugar for May delivery weakened to 13.25 US cents per pound from 14.35 cents.
RUBBER: The price of rubber fell as buyers stayed away from the market. By Friday, the Malaysian Rubber Board's benchmark SMR20 had fallen to 267.40 US cents per kilo from 269.10 a week earlier.