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LONDON, Sept 27: Gold prices shot up to a seven-year high this week on the back of volatility in the foreign exchange and oil markets, analysts said.
Oil prices also rocketed after the Opec oil cartel announced a surprise output cut of 3.5 per cent to try ward off a slide in prices as exports rise from Iraq and non-Opec producers such as Russia.
GOLD: Gold prices raced up to levels not seen since early 1996 after a call by G7 industrialised nations for more flexible exchange rates sent the dollar plunging.
A weaker US currency makes gold, traded in dollars on world markets, more attractive to investors buying with other currencies such as the euro and yen.
The dollar’s decline has also raised concerns about inflationary pressures in the world’s biggest economy that tend to benefit gold, seen as a store of value if prices rise.
Spot gold prices rose to as high as $393.30 in London on Thursday before profit-taking and news of planned bullion sales by the Swiss National Bank triggered a partial reversal.
The central bank said it would sell another 284 tons of gold by the end of September 2004, and another 130 tons in the following year.
By Friday afternoon, prices stood at a fixing of $382.70 on the London Bullion Market against $379.75 a week earlier.
But despite the pull-back, analysts said gold looked ripe for a further upswing.
SILVER: Silver prices bounded up to levels last seen in February 2000 in step with stronger gold prices, before retreating.
Fund/speculative trading interest remains the main driving force behind silver with swings in the gold price continuing to have a large influence, said James Moore, analyst at TheBullionDesk.com specialist website.
Silver stood at $5.190 per ounce on the London Bullion Market on Friday against $5.200 the previous week. Prices hit $5.35 on Thursday.
BASE METALS: Base metal prices remained strong, helped by a fall in the value of the dollar that saw bellwether copper reach the highest level since March 2001 briefly.
US dollar weakness has been a major factor providing support to base metal prices this week, said Barclays Capital’s Sternby.
Three-month zinc prices rose to $845 per ton from 828.50.
Three-month tin prices firmed to $5,020 per ton from 4,920.
Three-month lead prices gained to $533 per ton from 521.
OIL: Oil prices surged after Opec unexpectedly lowered its production ceiling by 900,000 barrels per day (bpd) to 24.5 million barrels on Wednesday.
The move, which caught traders by surprise, sent speculators scurrying to cover short positions.
The cartel said the decision was needed to prevent oil stocks in consumer countries rising as exports increased from Iraq and non-Opec producers such as Russia.
Iraq returned to the Opec table for the first time since the US-led war to oust Saddam Hussein, pledging to remain within Opec while ramping up exports from 900,000 bpd now to 1.8 million bpd at the end of March 2004.
Opecs decision to cut quotas ... appears to be a pre-emptive move to accommodate increasing Iraqi production and confirms our view that the cartel is still prepared to sacrifice market share in order to maintain the oil price within its $22-28 per barrel target band, said Lehman Brothers analysts.
SUGAR: Sugar prices slipped back as technical factors, notably the expiry of the October contract in New York at the end of this month, remained the main driving force.
COTTON: Cotton prices pushed upwards again on a cocktail of factors.
Fundamentally the market is being supported by reduced world production, lower ending stocks and the prospect of undetermined Chinese buying, said Refco’s Prendergast.
New York’s December contract climbed to 66.16 cents a pound on Thursday from 65.84 the previous week.
The Cotton Outlook Index of physical cotton, the average of the world’s lowest prices, gained to 66.45 cents from 65.25.
WOOL: Wool prices eased, dropping by 2.5 per cent on average at sales in number one producer Australia on strengthening of the local dollar.—AFP
