Many commodity markets sank this week to fresh multi-month lows, as the dollar surged to 22-month peaks against the euro on mounting fears that Greece could be heading for the eurozone exit. "The ongoing uncertainty over the eurozone debt crisis and contagion fears are holding markets hostage," said Barclays Capital analyst Sudakshina Unnikrishnan.
"The EU summit ended with no major breakthroughs, with Chancellor Merkell rejecting eurobonds for now "With the Greek elections scheduled for 17 June and the next EU summit at the end of June, market anxiety is likely to remain high over the next month."
The European single currency sank to $1.2496 on Friday, touching a low last seen on July 6, 2010. The strong greenback makes dollar-priced commodities more expensive for buyers using weaker currencies. That tends pull prices lower.
Commodities were also roiled by concerns over a possible slowdown in Asian powerhouse economy China. "Amid ongoing concerns of a slowdown in China's economy, its commodity trade data have come under even more scrutiny than usual," added Unnikrishnan. "The latest April data do reflect a slowing in the pace of imports, but we would caution against becoming too downbeat on China's commodity demand outlook just yet."
OIL: The crude oil market tumbled as investors shunned risky assets after former Greek prime minister Lucas Papademos warned that Athens might leave the eurozone. The euro has slumped on growing evidence of an economic slowdown and as an EU summit failed to reassure investors over Greece's future in the eurozone.
EU leaders pledged support for Greece at an informal Brussels summit on Wednesday, but analysts said the meeting highlighted divisions between France and Germany on dealing with the region's ongoing sovereign debt crisis. Brent North Sea crude struck $105.03 per barrel on Thursday, touching the lowest point since December 20. New York's light sweet crude sank on Wednesday to $89.28 a barrel, hitting the lowest level since November 1.
Prices have fallen considerably after soaring earlier this year on the back of simmering Middle East tensions. Investors remain anxious about the ongoing Greek crisis and possible repercussions for other fiscally-challenged nations like Italy and Spain, but the lack a breakthrough at talks over Tehran's disputed nuclear programme gave prices some support at the end of the week, analysts said.
Iran and the so-called P5+1 world powers ended two days of "very intense" nuclear talks in Baghdad on Thursday with little to show except a deal to meet again in Moscow, on June 18-19, after sharp disagreements over the way forward. The P5+1 powers comprise Britain, China, France, Russia and the United States plus Germany.
By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in July dived to $106.91 a barrel from $107.40 for the June contract a week earlier. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for June sank to $90.99 from $92.20.
PRECIOUS METALS: Precious metals also fell victim to the broader markets sell-off. "Prices continued to suffer corrections across the board with political uncertainties in Europe remaining in the foreground," noted Barclays Capital analysts in a research note.
By late Friday on the London Bullion Market, gold had fallen to $1,569.50 an ounce from $1,589.50 a week earlier. Silver declined to $28.24 an ounce from $28.48. On the London Platinum and Palladium Market, platinum fell to $1,456 an ounce from $1,466. Palladium slid to $590 an ounce, from $605 an ounce.
BASE METALS: Prices mostly dropped, with aluminium, copper, lead and nickel hitting their lowest levels for more than four months. "The metals tested lower (on Wednesday) as concerns over Greece weighed heavily on sentiment and as the dollar rose, metals slid," said analyst William Adams at Fast Markets. By late Friday on the London Metal Exchange, copper for delivery in three months fell to $7,637 a tonne from $7,716 a week earlier.
----- Three-month aluminium decreased to $2,014 a tonne from $2,059.
----- Three-month lead slipped to $1,952 a tonne from $1,964.
----- Three-month tin rose to $19,900 a tonne from $19,332.
----- Three-month nickel declined to $17,011 a tonne from $17,153.
----- Three-month zinc sank to $1,895 a tonne from $1,915.
COCOA: Cocoa futures pulled lower, continuing its losing streak. By Friday on Liffe, London's futures exchange, cocoa for delivery in July dipped to £1,478 a tonne from £1,532 a week earlier. In New York on the NYBOT-ICE, cocoa for July declined to $2,123 a tonne from $2,238.
COFFEE: Coffee prices rallied in London to hit the highest level since August 2010 boosted once again by speculative buyers. By Friday on NYBOT-ICE, Arabica for delivery in July fell to 167.50 US cents a pound from 179.95 cents a week earlier. On Liffe, Robusta for delivery in July climbed to $2,240 a tonne from $2,197.
SUGAR: Sugar recoiled to the lowest levels since August 2010 on expectations of a large surplus, dealers said By Friday on Liffe, the price of a tonne of white sugar for delivery in August dropped to $558 from $573 a week earlier. On NYBOT-ICE, the price of unrefined sugar for July slid to 19.68 US cents a pound from 20.71 cents.
RUBBER: Prices continue to slide on low China demand as the top commodity importer's economy eases. By Friday, the Malaysian Rubber Board's benchmark SMR20 dropped to 318.45 US cents a kilo from 326.25 cents the previous week.