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Gold leaps to 4-year high, oil sinks
publisher: Jang.com
Author:
Posted: 2002-06-02
LONDON: Gold prices leap to their highest level in more than four and a half years
this week as tensions over Kashmir mounted and the US dollar suffered another
mauling. Other metals also made gains, with precious metals in demand on the back
of the rally in gold prices. Base metal prices meanwhile were boosted by an
announcement from Anglo-Australian mining giant BHP Billiton -- the world's
number-three copper producer -- that it was to slash copper output by a further
80,000 tonnes. It was a different story in the oil market however where prices sagged
for the third consecutive week to their lowest level for a month, as the so-called "war
premium" unwound and signs pointed towards plentiful gasoline supplies to meet
increased demand during the US summer vacation period. The effect was
compounded by a renewed downward lurch in global equity valuations which raised
concerns about the robustness of the pick-up in global economic activity -- and
hence demand for oil. GOLD: Gold prices continued to march higher this week, rising
to their highest level since October 1997, aided by a weakening dollar, increased
geopolitical tensions, and the approach of a long weekend in Britain. Gold was fixed
on Friday afternoon at 326.60 dollars per ounce, up from 320.95 dollars the previous
week. Prices peaked at a fixing of 327.25 dollars Friday -- the highest since October
1997. The price of gold has been rising steadily for several weeks, as the precious
metal regained some of its safe-haven status against a backdrop of weaker global
equity markets, and rising tensions in the Middle East and between nuclear rivals
India and Pakistan. Britain, New Zealand and the United States prepared Friday to
send back families of their New Delhi-based diplomats amid simmering military
tensions between nuclear rivals India and Pakistan over Kashmir. "The gold market
remains lively, with plenty of activity from professionals," said Rhona O'Connell, an
analyst at the World Gold Council producer group. "With sustained concerns over the
equity markets, the dollar remaining under pressure, and India/Pakistan tension
seeming to build, the market is finding strong support... and overall sentiment
remains buoyant," she added. Analysts said that traders were also reluctant to sell
gold speculatively ahead of a four-day weekend in Britain for Queen Elizabeth's
golden jubilee. Barclays Capital precious metal analyst Howard Patten said reduced
levels of forward-sales by producers had helped encourage speculative players back
into the market. He said with this trend set to continue, gold prices could be set to
rise towards 340 dollars in the short term. However, he warned that such a level was
unlikely to be sustainable indefinitely. SILVER: Silver prices broke through five
dollars per ounce this week to reach their highest level in two years. The precious
metal "has had a good week, in the slipstream of gold," Patten said. According to the
analyst, the rise was explained not by fundamentals but by the actions of speculative
players. He said demand from consumers and industrial companies was expected to
remain weak, while there was no real shortage of supply. On the London Bullion
Market, silver was fixed at 5.045 dollars an ounce on Friday afternoon against 4.855
dollars the previous week. PALLADIUM and PLATINIUM: Platinum group metals
(PGM) were also in perky shape. On the London Platinum and Palladium Market
(LPPM), an ounce of platinum rose to 548 dollars per ounce against 539 dollars the
previous week. Analysts said the metal had benefitted from positive fundamentals,
most notably strong demand from the European and Japanese auto industry, where
the metal is used in the production of catalytic convertors. Meanwhile, palladium
prices were virutally flat after recent heavy falls, thanks to a reduction in the
number
of sellers. "But it still lacks any interest on the part of industrial investors,"
Patten
said. Palladium slipped to 351.3 dollars per ounce from 352 a week earlier. BASE
METALS: Copper prices rose this week after Anglo-Australian mining giant BHP
Billiton, the world's third-largest copper producer, said it would slash output this
year
by an additional 80,000 tonnes. The company had already announced in November it
would cut back production by 170,000 tonnes through to the end of 2002. The move
encouraged three- month copper prices on the London Metal Exchange to climb 34
dollars a tonne to 1,657 dollars BHP Billiton's decision to cut output further was made
in light of weakness in global demand following last year's economic downturn.
According to analysts at leading investment bank Salomon Smith Barney, with
worldwide copper output expected to be slashed by 700,000 tonnes this year, prices
were likely to pick up in the second half as the global economic recovery gathered
momentum. The rally in the copper market underpinned demand for aluminium, with
three-month aluminium prices rising to 1,394 dollars a tonne from 1,355 dollars.
According to BNP-Paribas base metals analyst Charles Kernot aluminium prices
might be supported by an increasing realisation that further restarts of North America
smelters were unlikely because of high energy prices. Among the other base metals,
zinc prices fell three dollars to 773 dollars a tonne. Three-month nickel prices rose
30
dollars a tonne to 6,630, tin rose 10 dollars to 4,200 dollars a tonne while lead
slipped six dollars to 458 dollars a tonne. OIL: Oil prices fell to one-month low
points
as the so-called "war premium" unwound and signs pointed towards plentiful
gasoline supplies to meet increased demand during the US summer vacation period.
By Friday, Brent crude for July delivery had fallen to 24.23 dollars from 25.03 dollars
a barrel a week earlier. In New York, July-dated light sweet crude futures dipped to
24.05 dollars a barrel from 25.70 dollars. Prices fell after figures from the US energy
department showed that gasoline stocks had risen by 2.0 million barrels the previous
week, while crude oil stocks edged down by a modest 1.5 million barrels. The market
shrugged off ongoing violence in the Middle East as concerns that the conflict might
lead to disruption to Gulf oil supplies faded. "The political premium in the oil price
is
unwinding," said Deutsche Bank analyst J J Traynor. "People are looking at the
fundamentals of the oil price which is that inventories are actually pretty high," he
told
AFP. He said European refiners had not been able to ship much oil-based product to
the United States over the northern hemisphere winter because US demand was low
owing to warm weather and a poor economic climate. "So of course what you're
seeing now is Europe basically pushing as much product as it possibly can across to
the States, getting ready for the driving season and that of course is pushing up
stocks," he said. "It's not saying that demand is weak, it's saying that demand was
weak and there's a lot of product kicking around because of that overhang of
previously weak demand." With prices weakening again, the Organisation of
Petroleum Exporting Countries (OPEC) is expected to extend last year's steep output
cuts when they meet in Vienna on June 26. RUBBER: Rubber prices gained again as
wet weather in Far East producer regions hindered activity. "Production is quite tight,
because of heavy rains in Malaysia and very hot weather in Thailand, because the
trees are just not producing enough latex," said a trader at brokers Symington. In
Kuala Lumpur, the RSS index rose to 2.8450 ringgit per kilo from 2.7750 ringgit the
previous week. COCOA: Cocoa prices resumed their upward march as the prospect
of a production deficit for the second year in a row continued to underpin the market,
traders said. On Liffe, London's financial futures exchange, the price of a tonne of
cocoa for September delivery rose to 1,256 pounds a tonne Thursday from 1,230
pounds the previous week. On the CSCE, the New York futures market, the
September contract climbed to 1,585 dollars a tonne from 1,547 dollars. COFFEE:
Coffee prices rode higher on the back of speculative buying though the outlook
remains glum with a supply glut weighing on the market, traders said. "There is
currently no sign of impending frost in the Brazil coffee growing areas, and sentiment
has turned more negative," said brokers Refco. "Fundamentally, the market is
oversupplied going into the traditional frost season in Brazil." On New York's CSCE
market, Arabica prices for September delivery firmed to 54.15 cents a pound
Thursday from 53.40 cents the previous week. On LIFFE, the London financial
futures exchange, Robusta quality for July delivery rose to 533 dollars a tonne
Thursday from 518 the previous week. SUGAR: Sugar prices edged higher,
benefitting from nervousness in the market ahead of the expiry of Russian import
quotas, traders said. On LIFFE, a tonne of white sugar for August delivery ticked up
to 199.1 dollars Thursday from 197.6 dollars the previous week. On the CSCE in
New York, a pound of unrefined sugar for October delivery nudged up to 5.60 cents
from 5.53 cents. "The timetable for sugar getting into Russia and being into quota is
still the key issue, because the end of the June is a weekend it's all becoming quite a
problem," said Chris Pack, an analyst at broker Czarnikow. But the prospect of
abundant Brazilian supplies continued to weigh on the market, traders said. The US
agriculture department reported last week that world sugar production would grow by
3.8 per cent in 2003 from 2002. Brazil should gather a record harvest of 23 million
tonnes of sugar beet in 2003, up 13 per cent from 2002. SOYA: Soya prices kept
climbing thanks to fund-buying and concerns about possible disruption to Argentine
exports because of strike action, traders said. On the Chicago Board of Trade
(CBoT), a bushel of soya for July delivery climbed to 5.01 dollars a bushel from 4.91
dollars the previous week. GRAINS: Grain prices rose in response to forecasts of hot
and humid weather in the American Midwest producer regions that traders said could
delay sowings. On LIFFE, the London futures market, the price of a tonne of wheat
for July delivery advanced to 62.50 pounds from 58.75 pounds a week earlier. In
Chicago a bushel of wheat for July delivery gained to 276.25 cents from 271.50 cents
a week earlier. A bushel of maize in Chicago for May delivery firmed to 212.50 cents
from 207.50 cents the previous week. COTTON: Cotton prices rallied for the third
week in a row thanks to a weaker dollar, firmer demand and reports of dry weather
affecting crops in Mexico, traders said. "Low cotton prices and an enhanced outlook
for the 2002/03 US crop as well as a dollar under pressure are supportive for cotton
near term," Refco brokers noted. The US agriculture department reported that US
cotton exports in the week to May 24 had slumped by 23 per cent from the previous
week. In New York, the July contract climbed to 38.24 cents a pound on Thursday
from 37.15 cents the previous week. The Cotton Outlook Index of physical cotton,
the average of the world's lowest prices, rose to 41.10 cents a pound from 40.05
cents the week before. WOOL: Australian wool prices, which surged earlier this year,
slipped to nearly four-month lows because of a stonger Australian currency against
the US dollar, which deterred Chinese buyers. According to the Australian statistics
department, wool exports fell by 9.8 per cent in April from the previous month,
leaving them down 30 per cent over a year. The Australian Eastern index dipped to
892 cents per kilo from 902. The British Wooltops index was unchanged at 477
pence.
Copyright 2002 (Middle East News Online). This news item is distributed via Middle
East News Online (MiddleEastWire.com).
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