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Gold prices have risen in recent weeks, reaching a two-year high of $312 on April 30. It has benefited from the US dollar weakness, stock market volatility and solid market fundamentals.
The gold price is 17 per cent higher than it was this time last year, supported by the factors such as the Middle East crusts, worries about the strength of the US economic recovery, concern about the Japanese banking system and the move-away from hedging by the producers.
“Gold looks set to continue to trade between $306 and $312 with a bias towards the downside,” said John Reade, precious metals analyst at the UBS Warburg in London. “We have seen reasonable physical buying at the lows of the recent range, but this interest has been largely satisfied, taking away one source of support.”
The general environment for gold remains positive, said the HSBC metals expert Merlin Marr-Johnson. The weakening dollar, poor equity markets, economic and political uncertainty are there.
While analysts think gold will have support as long as the dollar remains vulnerable, some also warn that the risk of a correction is increasing as speculators add to their already long positions in the metal. The May 2, commitments of the readers report showed that the total speculative long position on Cormex had increased by 1.12 million ounces to 9.8 million ounces in the week ending April 29, its highest since 1996. The UBS Warburg estimates that a further 1 million ounces of speculative longs have since been added.
Platinum and palladium prices fell on May 1, unsettled by the talk that Russia, the largest palladium producer, supplying two-thirds of the worlds palladium had resumed its exports and news that the Anglo American Platinum, the largest platinum exporter, was predicting an 11 per cent rise in production this year.
At London’s benchmark on May 1, palladium was $352 a troy ounce after touching $344 earlier in the day — its lowest since December 3. Platinum fixed at $520 an ounce after a low of $5l8, its weakest for a month.
Crude oil prices were lower at the start of the week, which began on May 6, as Iraq said it was ending its export suspension. But later the suicide bombing in Israel renewed tensions in the Middle Fast and pushed prices higher. The effect was reinforced by the news of a steep fall in the US oil inventories, with the US energy information administration reporting a fall of 5.5 million barrels last week.
Late in London June Brent was trading at $26.25 a barrel, compared with May 10, close of $25.75. By early in New York, Nymex WTI was $27.96 a barrel compared with $26.62 at the end of last week. Iraq’s 30-day oil export suspension reduced overall Opec production by 1.33 million barrels a day in April, according to a Platts survey of Opec and oil industry officials. But excluding Iraq, the cartel’s other 10 members produced only 30,000 barrel per day less.
Prices were also lifted by a figures from the US energy department which estimated that the US crude inventories fell by 5.5 million barrels in the week to May 3, though the news was offset somewhat by a rise of 2.2 million barrels in the gasoline inventories.
The rise in oil prices was, however, capped after Iraq said it had recommenced shipments of oil, following Baghdad’s decision to turn off the taps on April 8 in retaliation for Israeli incursions into the West Bank.
The market had been expecting to hear that the US crude supplies had fallen by about 2.4 million barrels last week on the delayed result of the labour dispute in Venezuela. Instead, weekly data from the American Petroleum Institute (API) showed a rose of 7.6 million barrels. The department of energy later put the figure at 4.6 million barrels. The main reason for the rise was a surge in exports to 9.99 million barrels a day, according to the API.
But the Gulf region accounted for 86 per cent of the supply increase. “The US crude oil system is showing early signs of dislocation, and that normally signals more volatility and price spikes’, said Paul Horsnell at the JP Morgan. “On the (Gulf coast, inventories have shot up. In the Midwest, inventories have been falling sharply. In short, there’s enough inventory but it’s not in the right place.”
