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Gold prices rose over $360 an ounce for the first time in almost six years as mounting war fears dragged the US dollar lower and increased the gold’s price. The metal reached $360.25 in London, its highest since March 1997.
The metal’s gains — peaking at a six-year high of $367.60 an ounce in New York on January 23 — were fuelled by a deteriorating US dollar, falling share prices and nervousness about the likelihood of a war in Iraq.
The dollar on January 24 eased to three-year lows against the euro for the seventh time in as many days, and to another four-year low against the Swiss franc. Traders continued to unload dollars on concerns that a military conflict would hurt capital flows to the US. The stock market sentiment was poor, with the London’s FTSE index falling for the ninth straight session.
Prompted by tough talks from the US President, many investors have jumped into gold as an insurance policy in times of conflict, convinced by a growing momentum towards war.
Oil prices rose to new two-year highs in New York before falling back. On January 24, the price of benchmark Brent North Sea crude oil for March delivery stood at $30.0 a barrel against $29.88 a week earlier.
The secretary general of the Organization of Petroleum Exporting Countries recently said that he believed the world was not on the verge of an oil crisis, but the threat of a US led war on Iraq could change that.
Saudi Arabia said on January 25, there was no lack of oil in world markets despite fears of war in Iraq, signalling the world’s top oil producer has no intention to raise production further for the moment. Oil prices have surged — topping Opec’s $22-$28 a barrel target range — amid fears of a US-led war in Iraq and because of a seven-week-old general strike that has cut exports from Opec member Venezuela. In the United States, the main buyer on Venezuelan crude, prices this week hit a two-year high of $35.20 a barrel, closing at $33.40 on January 24.
Opec agreed on January 12 to increase oil production by 1.5 million barrels per day (bpd) in a bid to curb price surged triggered by a strike in Venezuela and the threat of war on Iraq, which has the second biggest known oil reserves in the world after Saudi Arabia.
The platinum group metals (PGMs) climbed strongly, notably platinum, which reached the highest level in 17 years on supply worries. Platinum prices rose to as high as $652 an ounce on January 23, the highest level since September 1986. By January 24, an ounce of platinum had firmed to $643 on the London Platinum and Palladium Market from $627 the previous week.
Although the higher prices seemed to have driven consumers on to the sidelines, analysts were predicting that supply would be unable to keep up in 2003 with buoyant demand for the metal, widely used in the jewellery and autocatalyst industries.
Base metals prices forged ahead for the fourth week running, led higher by nickel as a threatened strike by unions at the Russian mining giant, Norilsk, helped the market shrug off concerns about the potential impact of a Gulf war on the global economy.
Nickel prices soared by around eight per cent on fears that the threatened strike at Norilsk — the world’s leading producer of the metal — would hit world supplies.
