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| August 19, 2002 | Monday | Jamadi-us-Saani 9, 1423 |
World commodity report
In the week ended on August 3-4, gold got some relief as weak the economic data led to doubts about the pace of the US recovery. On August 2, gold prices were at $305.60 an ounce in the London Bullion Market.
Gold prices which had fallen by 5.6 per cent in the previous week, were under the hammer early in the week because of a firmer dollar and a tentative recovery in world stock markets.
Gold prices rebounded in response to a weak US data which indicated the world’s leading economy could be lurching back towards recession and brought the recent revival in global stock markets to an abrupt halt.
Gold was $312.20 a troy ounce at London’s benchmark afternoon fixing, its strongest since July 24 and $6.45 above August 6 afternoon fix. Gold has been languishing in recent weeks. The market built up a large long position in the metal — the highest since 1996 — but in June profit-taking set in.
Some analysts think gold’s weakness was linked to stock market calls. They suggest funds were selling the metal to raise cash to finance margin calls on their stock positions.
There was good fund buying, and the price moved through $311.20, which is its 100-day moving average. In doing so we think it triggered short covering. That could be what took it as high as $314 at one point, said metals analyst at TheBillionDesk.com. He added that better rainfall in India might improve the outlook for the harvest and therefore increase income available to buy gold. India is the largest gold consumer.
Oil prices had fallen on August 5 on the news that Algeria had requested a higher production quota from the Organization of Petroleum Exporting Countries. Nymex September crude was 38 cents lower at $26.46 a barrel, while in London, the September Brent crude contract on the International Petroleum Exchange was 46 cents lower at $24.85.
Algeria has a current quota of 693,000 barrels per day, while its production capacity is estimated at 1.1 million barrels per day.
Nigeria, also asking for an increase in oil output quota, added to the gloom with news that it now has the capacity to produce 2.6 million barrels per day, against its quota of 1.79 million barrel per day.
Crude oil futures received some support from comments by Alvaro Silva, Opec secretary-general on August 8. Silva said it was too early to talk of the cartel raising output, as many traders have been expecting, at its September meeting.
This boosted oil futures, which had slipped on August 8 after the US promised to use caution with Iraq, easing market tensions about an imminent attack.
September Brent reached a high of $25.20 a barrel. By the close in London it was trading 16 cents up on the previous close at $25.11 a barrel. In New York, September WTI peaked at $26.83 a barrel. By the close it was up 17 cents at $2.667 a barrel.
Silva described his meeting with Russian energy minister Igor Yusufov as “encouraging”. Russia, the world’s second-biggest crude oil exporter after Saudi Arabia, is a key issue for the Organization of the Petroleum Exporting Countries.
In the past, Moscow has joined forces with Opec in supply cuts to raise the prices. Opec is concerned that Russia is biting into the cartel’s market share.
The Organization of the Petroleum Exporting Countries, which controls two-thirds of world exports, meets on September 19 in Japan to decide on output policy for the fourth quarter. Group insiders expect it to raise its output ceiling to cater for a seasonal rise in demand during the winter season.
Traders said reports of Saudi-Russian talks on output reduction were yet to have any noticeable impact.
Iraq is already pumping oil at well below full capacity because of a prolonged pricing dispute with the United Nations, which monitors its exports under an oil-for-food deal.
But dealers fear a full-blown United States attack on Baghdad could disrupt supplies even further, and they fear retaliation by the government of Saddam Hussein could also hit supplies from the neighbours like Saudi Arabia.
The shortage of Iraqi oil, combined with tough curbs on Opec exports, is creating a sharp contra-seasonal decline in global inventories.
Coffee prices have weakened in a market wallowing in excess supply owing to the harvest of a bumper crop in Brazil. Prices have fallen to 47.50 cents a pound from 47.80 cents a week earlier. On Liffee, Robusta quality for September delivery fell to $496 a ton on August 1 from $521 the previous week. Traders expect further price deterioration.
Cocoa prices fell back in lacklustre trading on weak demand and a firmer dollar. Oil Liffee, London’s financial futures exchange, the price of cocoa for September delivery dropped to 1378 pounds a ton on August 1 from 1400 pounds the previous week.
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