The price of gold soared to a record high above 1,060 dollars an ounce this week, spurred on by a weakening dollar and doubts about the greenback's future as the world's leading reserve currency. The price of gold struck a series of all-time highs this week, beginning on Tuesday, as the dollar slid on a reported plan by Gulf states to stop using the greenback for oil trading.
PRECIOUS METALS: Gold hit 1,061.52 dollars an ounce on Thursday, beating the all-time peak of 1,032.70 dollars struck in March, 2008. "Gold prices hit an all-time high as the dollar weakened," said Barclays Capital precious metals analyst Suki Cooper.
"The dollar weakness appears to be related to ... (reported) secret talks about oil being priced in a basket of currencies including gold rather than the dollar, which has added to concerns about the future role of the dollar in international financial markets," she added.
The dollar's future as the world's top currency was thrown into doubt on Tuesday as a report said Arab states had launched secret moves with China and Russia to stop using the greenback for oil trading. Arab states have launched moves with China, Russia, Japan and France to stop using the dollar for oil trades, British daily The Independent reported on Tuesday.
But the story was denied by a number of nations. The United Nations meanwhile on Tuesday called for a new global reserve currency to end dollar supremacy, which has allowed the United States the "privilege" of building a huge trade deficit. The Independent's Middle East correspondent Robert Fisk wrote in his paper: "In the most profound financial change in recent Middle East history, Gulf Arabs are planning - along with China, Russia, Japan and France - to end dollar dealings for oil."
They would instead switch "to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council (GCC), including Saudi Arabia, Abu Dhabi, Kuwait and Qatar," added Fisk. Gold, viewed as a safe-haven investment, has won back favour in recent months as the global economy struggles out of its worst slump in decades.
The run-up in gold has been largely driven by weakness in the dollar which makes dollar-priced commodities cheaper for holders of stronger currencies, boosting demand. Gold traditionally wins support from fears about higher inflation because the metal is widely regarded by investors as a safe store of value.
Precious metals consultancy GFMS last month warned that the current upwards trend in gold may not be sustainable should global stimulus packages fail to boost flagging demand in the battered world economy and inflation fall as a result.
The Group of 20 leaders of emerging and developed nations recently agreed at a summit in Pittsburgh not to roll back massive stimulus measures that helped contain a severe global recession. Gold's run higher this week meanwhile offered support to other precious metals, with silver hitting a 14-month peak of 17.92 dollars an ounce. Palladium reached the highest point since August, 2008.
By late Friday on the London Bullion Market, gold surged to 1,051.50 dollars an ounce from 1,003.50 dollars a week earlier. Silver jumped to 17.63 dollars an ounce from 16.21 dollars. On the London Platinum and Palladium Market, platinum climbed to 1,337 dollars an ounce at the late fixing on Friday from 1,269 dollars. Palladium advanced to 323 dollars an ounce from 292 dollars.
OIL: World oil prices rallied as the dollar weakened on the report that Gulf states considered dropping the greenback for oil transactions. Prices meanwhile closed up more than two dollars a barrel on Thursday as investors sought refuge in commodities amid a weakening dollar and as economic recovery won a lift in the United States, traders said. Alcoa surprisingly swung into profit in the three months to September 30 after three quarters running of losses, the US aluminium giant announced Wednesday.
The company said its net income was 77 million dollars or eight cents a share in the quarter ended September, compared with a net loss for the second quarter of 454 million dollars or 47 cents per share. Alcoa was the first company in the blue chip Dow Jones Industrial Average index to announce results for the third quarter. It had been expected to report a loss excluding special items of nine cents a share.
Oil market traders also digested news from the main armed group in southern Nigeria which on Wednesday said it would resume attacks on the oil industry when its cease-fire expires on October 15. The Movement for the Emancipation of the Niger Delta (MEND) dismissed a government amnesty programme as a "charade" and warned it would no longer limit its attacks on pipelines.
Limiting gains Friday was a report from the International Energy Agency that warned demand for crude was "in the doldrums" and that forecast prices would next year fail to rise much higher compared with current levels. Oil demand is firming but the global market is still weak, trapped in a bull-bear conflict over how a groggy recovery from the global crisis will affect energy consumption next year, the International Energy Agency said.
Pointing to an oil price of about 75 dollars a barrel next year, the IEA warned that immediate oil demand was "in the doldrums." However, the rate at which demand was shrinking was "clearly falling" and demand in the fourth quarter would probably show an increase over 12 months, it said. Demand for oil has plunged amid the world economic downturn, the most severe since the 1930s.
Oil prices tumbled from historic highs of more than 147 dollars in July 2008 to about 32 dollars in December because of the global recession but have since won back ground on recovery hopes.
By Friday on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in November jumped to 71.89 dollars from 69.77 dollars a week earlier. On London's InterContinental Exchange (ICE), Brent North Sea crude for November advanced to 70.14 dollars a barrel from 67.93 dollars a week earlier.
BASE METALS: Base metals prices rallied, boosted by a falling dollar. Aluminium won additional support on Alcoa's results, while tin was in focus after a single investor bought up more than 90 percent of the metal traded in London.
A senior industry source told AFP that British hedge fund Ebullio Capital Management had bought more than 90 percent of tin traded on the London Metal Exchange, echoing press reports. A spokesman for Ebullio declined to comment on the matter, which has failed to boost tin prices significantly this week.
"Our published reports show that there is a dominant position held of over 90 percent," said Diarmuid O'Hegarty, deputy chief executive of the LME, who is also in charge of the market's regulation. O'Hegarty, who declined to name the group involved, added that the dominant position was perfectly legal.
"The LME has rules to deal with dominant positions and they are in force and they are operating and that's why we say that there is an orderly market," added O'Hegarty. "In other words the market is designed to deal with dominant positions and the lending guidance in place to deal with that is being complied with."
One analyst said it was unclear what long-term effect the purchase would have on prices. "It's pushing up the price... but it's difficult to say what impact it will have over a longer period," said Peter Kettle, head of market studies at the International Tin Research Institute (ITRI).
In other news concerning base metals this week, Mongolia on Tuesday sealed a long-awaited multi-billion-dollar deal with Canada's Ivanhoe Mines and Anglo-Australian miner Rio Tinto to develop one of the world's richest copper deposits. By Friday on the London Metal Exchange, copper for delivery in three months jumped to 6,260 dollars a tonne from 5,853 dollars a week earlier.
-- Three-month aluminium gained to 1,895 dollars a tonne from 1,812 dollars.
-- Three-month lead increased to 2,260 dollars a tonne from 2,100 dollars.
-- Three-month tin advanced to 14,700 dollars a tonne from 14,175 dollars.
-- Three-month zinc rose to 2,066 dollars a tonne from 1,871 dollars.
-- Three-month nickel climbed to 19,053 dollars a tonne from 17,125 dollars.
COCOA: Cocoa prices hit the highest level for 24 years for a second week running by reaching 2,185 pounds a tonne on expectations of lower output in leading producer Ivory Coast.
By Friday on Liffe, London's futures exchange, the price of cocoa for delivery in December jumped to 2,150 pounds a tonne from 1,998 pounds a week earlier. On the New York Board of Trade (NYBOT), the December cocoa contract climbed to 3,248 dollars a tonne from 2,993 dollars.
SUGAR: Sugar futures fell, one week after striking 28-year highs of 640.50 pounds a tonne on tight supplies. By Friday on Liffe, the price of a tonne of white sugar for delivery in December fell to 573 pounds from 614 pounds a week earlier. On NYBOT, the price of unrefined sugar for March dropped to 22.62 US cents a pound from 24.06 cents.
GRAINS AND SOYA: Maize, wheat and soya prices all rose. By Friday on the Chicago Board of Trade, maize for delivery in December climbed to 3.69 dollars a bushel from 3.33 dollars a week earlier. November-dated soyabean meal - used in animal feed - increased to 9.56 dollars from 8.85 dollars. Wheat for December gained to 4.70 dollars a bushel from 4.41 dollars.
COFFEE: Coffee futures advanced. By Friday on Liffe, Robusta for delivery in November gained to 1,484 dollars a tonne from 1,401 dollars a week earlier. On the NYBOT, Arabica for December increased to 138.60 US cents a pound from 131 cents.
RUBBER: Malaysian rubber prices extended gains on tight supplies, buying enquiries from India, Pakistan and South Korea, as well as steady demand from China, dealers said. On Friday, the Malaysian Rubber Board's benchmark SMR20 rose to 221.65 US cents a kilo from 211.15 cents a week earlier.