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Gold prices have risen recently in response to a weaker and geopolitical concerns. On the London Bullion Market, the spot price of an ounce of gold rose to as high as $337 an ounce on December 13, levels last seen in October 1999.
Then 15 central banks, including those under the European Central Bank as well as the UK, Sweden and Switzerland signed a pact to limit their lending and sales of metal for five years. The Washington agreement, as the deal signed in September 1999 was know, caused surprise $70 spike in the price, which had been floundering near 20-year lows.
The metal had been edging higher in recent weeks, helped by a less robust Wall Street and a wobbly dollar. If you look at gold over the last 20 years you can correlate it totally with the health of the US economy.
The gold price has gained nearly 20 per cent over this year as political instability has grown, economic uncertainty has battered equity markets and investor confidence has been bruised by a string of high-profile corporate accounting scandals.
The dollar fell sharply against other major currencies in December 13, pushing the euro up to its highest level in almost three years against the US unit.
Analysts say that gold prices could ride even higher if the dollar loses further ground, though higher prices tend to sap at physical demand. Gold is expected to remain in a strong position if the dollar weakness persists and as geopolitical uncertainty prevails says an analyst and Barclays Capital.
Opec oil producers recently agreed to cut excess supplies to support prices already buoyed by the threat of war in the Middle East. The Organization of Petroleum Exporting Countries agreed to increase quotas by 1.3 million barrels and to reduce overall production to the level of the new quotas and to keep prices between $22 and $28. The pact for the first quarter 2003, initiated by Saudi Arabia, meant they were aiming for a 1.7 million barrels per day, seven per cent cut in actual production.
Oil prices rose after this decision and as concerns mounted about the impact of the crises in Venezuela, the world’s number five exporter.
In the London market, on December 13, benchmark Brent North sea crude oil for January delivery had risen to $27.25 a barrel here against $25.92 a week earlier. In New York, January dated light sweet crude futures traded at $28.52, up from $27.23 a week earlier.
Opec had announced on December 12 it would cut output in line with a new, raised official ceiling of 23 million barrels per day.
The revised quotas could theoretically result in a cut of between 1.2 and 1.7 million barrels per day if they are adhered to, although analysts warned that the key test was yet to come. The GNI analyst Lawrence Eagles was skeptical Opec members such as Algeria, Libya, Nigeria and Venezuela would toe the line, and warned the boost to oil price could prove short lived.
Cocoa prices rose in London for the fourth consecutive week, because of deteriorating situation in Ivory Coast. It has triggered heavy buying by both speculators and industrial users of the commodity.
On LIFFE, London’s financial futures exchange, the price of cocoa for March delivery climbed to $1,335 a tonne on December 13 from 1,246 the previous week. On the CACE, the New York futures market, the March contract surged to $2,026 per tonne from $1.895.
Rebels have taken over more the half the country since parts of the army staged a muting in September. A truce was signed on October 17, but renewed fighting broke out late last month. Marketing of Ivory Coast’s 2002-03 cocoa main crop may be disrupted because of there events.
Exporters get about 85 per cent of their cocoa from merchants who head into the bush with cash to purchase beans, but buyers are getting increasingly wary of sending large sums of money up-country.
