LONDON, Aug 18: Metals prices plunged this week as traders sold heavily investments in gold and copper owing to fears of a global economic slowdown caused by the ongoing US housing crisis.
But a move Friday by the US central bank aimed at easing market worries helped push up crude futures.
Losses in the US subprime mortgage market -- high-risk property loans to which many US banks and investment funds are exposed -- has spread to other regions and affected equity, commodity and foreign exchange trading since August 9.
The biggest risk to the commodity market has been and continues to be fund liquidation, Goldman Sachs analysts noted on Friday.
In a move aimed at tackling fears of a global credit crunch, the US Federal Reserve on Friday slashed the lending rate it charges commercial banks.
The decision by the US central bank, to cut its so-called discount window rate by 50 basis points to 5.75 per cent, helped world share prices to recover from losses over the past week and led the euro to rebound against the dollar and yen.
OIL: Oil prices rebounded, with Brent crude bouncing back above $70 a barrel in London, lifted by the Fed’s monetary policy change on Friday and fears that Hurricane Dean could damage energy facilities in the Gulf of Mexico.
If by some miracle the damage from Dean is not that bad and the stock market is (again) lousy we could see a big drop in (the crude) price next week, Alaron trader Phil Flynn said.
It was a roller-coaster of a week for oil prices, as they fell steeply on Thursday when hefty declines on world stock markets left traders fretting about potentially risky investments in the commodities markets.
Traders had said that some speculators and investment funds were moving cash into more secure investments and out of riskier holdings, and that some of this movement had dented the oil market.
Oil prices rebounded Friday, however, owing to the Fed action and news that Hurricane Dean was forecast to become a major hurricane within the next 24 hours.
Crude futures won support also from news that crude inventories had fallen last week. The US Department of Energy said Wednesday that US crude inventories slumped by 5.2 million barrels last week -- more than double a fall of 2.5 million forecast by analysts.
The Organisation of the Petroleum Exporting Countries meanwhile increased its forecast for world oil demand growth in 2007. Opec said in a monthly report that it would hit 1.3 million barrels per day, slightly higher” than the estimate given in July.
By Friday, Brent North Sea crude for October delivery advanced to $70.51 a barrel on Friday, compared with $69.70 for the September contract a week earlier.
New York’s main oil futures contract, light sweet crude for delivery in September, gained to $71.92 a barrel, from $70.68.
PRECIOUS METALS: Gold, silver, palladium and platinum prices all dropped owing to the financial uncertainty.
Gold fell despite traditionally being seen as a safe store of value in troubled times, while the other precious metals mirrored its downward spiral.
Gold is being sold to pay for losses in other markets, UBS analyst Robin Bahr said.
Gold is the ultimate safe haven ... If you believe it’s the end of the world next Friday, then you’ll buy gold, Bahr added.
On the London Bullion Market, gold fell to $657.50 an ounce at Friday’s late fixing, from $670.50 a week earlier.
Silver declined to $11.69 an ounce, from $12.69.
On the London Platinum and Palladium Market, platinum slipped to $1,245 an ounce at the late fixing Friday, from $1,269 a week earlier.
Palladium decreased to $334 an ounce, from $349.
BASE METALS: The prices of base metals slumped.
Base metals prices are likely to continue tracking movements in the financial markets, which could mean further short-term losses, Barclays Capital analyst Gayle Berry said.
On Friday, the price of copper for delivery in three months tumbled to $6,930 a ton on the London Metal Exchange, from $7,400 a week earlier.
Three-month aluminium prices fell to $2,498 a ton, from $2,599.50.
Three-month nickel prices dropped to $25,900 a ton, from $26,100..
Three-month lead prices slipped to $2,498 a ton, from $2,785.25.
Three-month zinc prices fell to $3,075 a ton, from $3,250.
Three-month tin prices dived to $13,565 a ton, from $16,352.50.
SUGAR: Sugar prices plunged to a two-year low of 273.50 pounds a ton in London on Friday.
White sugar futures declined to two-year lows as the sharp sell-off in global equities undermined virtually every commodity market, said Fimat analyst Jim Cassidy.
By Friday on the LIFFE, the price a ton of white sugar for October delivery shrunk to 280.50 pounds, from 281.00 pounds a week earlier.
On the NYBOT, the price of unrefined sugar for October delivery decreased to 9.37 US cents a pound, from 9.54 cents a week earlier.
COFFEE: Coffee prices weakened further.
These prices clearly look more attractive to the industry (buyers) and they are buying, but whether there is more of a sell-off to come first, is impossible to tell, Sucden analyst Ralph Hawes said.
By Friday on the LIFFE, Robusta quality for November delivery slid to $1,693 a ton, from $1,817 one week earlier.
GRAINS AND SOYA: Maize and soya prices fell owing to rainy weather in the United States which increases supply.
“Weather is still going to play a key role going into next week for soya beans,” Allendale analyst Joe Victor said.
By Friday on the Chicago Board of Trade, the price of maize for September delivery dropped to $3.22 a bushel, from $3.33 a week earlier.
Wheat for September delivery firmed to $6.68 a bushel, from $6.67.
WOOL: The price of wool rose in major producer Australia this week on strong foreign buying despite a lack of interest by key consumer China.
Purchases were again widely spread, with the reduction in activity by buyers for China again evident, but to a lesser extent, the Australian Wool Industry Secretariat said.
The secretariat said the issue of whether China has reached its Australian wool quota for the year was still unresolved.
The Australian wool market finished 2.0 per cent higher on average, with the Eastern Index closing at 9.25 dollars a kilo.
