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Commodities soar after fresh Fed stimulus

September 16, 2012


LONDON, Sept 15: Commodities surged this week, with many striking multi-month peaks after the Federal Reserve embarked upon new stimulus plans to boost the US economy, a major consumer of raw materials.

Global markets rallied after the Fed said on Thursday it would start a third programme to purchase $40-billion per month in mortgage-backed bonds — known more commonly as quantitative easing (QE3).

Oil: Prices hit four-month highs on news of more stimulus measures in the world’s largest crude consuming nation, and on the back of ongoing geopolitical tensions in the Middle East. Brent North Sea crude soared to $117.95 a barrel, touching the highest level since early May. New York’s West Texas Intermediate (WTI) surged to a similar peak at $100.42.

“The Fed’s announcement has caused crude oil prices to climb to multi-month highs,” said Commerzbank analyst Carsten Fritsch. While the announcement had been expected, dealers cheered the fact that the central bank said it will continue with the policy until it feels the economy is strong enough.

Crude futures also jumped higher in the wake of violent protests touched off by a film mocking Islam that was posted on the internet.

By late on Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in October leapt to $116.68 a barrel from $112.93 a week earlier. On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for October rose to $98.87 a barrel compared with $94.81 the previous week.

Precious metals: Gold surged to a six-month high on the back of the Fed stimulus, while platinum was propelled by fresh labour unrest in key producer South Africa.

“The gold price rose... and looks set to continue its upward trajectory in the current economic climate as an increasingly inflationary environment in the US is supportive of a strong gold price going forwards,” said Westhouse Securities analyst Rob Broke.

The glamorous metal raced as high as $1,778 per ounce, which was the highest level since February 29.

Silver, meanwhile, jumped to $34.94, last reached in March.

At the same time, platinum soared to $1,715.12 an ounce — also last seen on February 29. “The (platinum) price has rebounded strongly since mid-August, up by more than 20 per cent to $1,700, largely on news of severe supply disruptions in South Africa,” said BNP Paribas analyst Anne-Laure Tremblay.

By late on Friday, on the London Bullion Market, gold surged to $1,775.50 an ounce from $1,728 a week earlier.

Silver soared to $34.71 an ounce from $32.22.

On the London Platinum and Palladium Market, platinum increased to $1,697 an ounce from $1,593.

Palladium gained to $702 an ounce from $647.

Base metals: Base or industrial metals also hit multi-month pinnacles.

On Friday, copper, tin and nickel hit four-month highs. Aluminium and zinc scored peaks last witnessed in late March, while lead hit a level last seen at the end of February.

“Copper prices have hit their highest levels since early May on an expectation that yesterday’s (Fed) measures could lead to a recovery in industrial activity,” added CMC Markets analyst Michael Hewson.

By late on Friday on the London Metal Exchange, copper for delivery in three months jumped to $8,399 a ton from $7,822 a week earlier.

Three-month aluminium soared to $2,190 a ton from $2,003.

Three-month lead climbed to $2,254 a ton from $2,079.

Three-month tin rocketed to $21,350 a ton from $19,915.

Three-month nickel leapt to $17,640 a ton from $16,300.

Three-month zinc surged to $2,110 a ton from $1,960.

Sugar: The futures rebounded from a two-year low which was struck the previous week.

By Friday on New York’s NYBOT-ICE exchange, the price of unrefined sugar for October rose to 19.94 US cents a pound from 19.09 cents. On liffe, London’s futures exchange, the price of a ton of white sugar for delivery in December grew to $574.30 from $549.30 a week earlier.

Coffee futures also gained ground.

By Friday, on NYBOT-ICE, Arabica for delivery in December rose to 181.35 US cents a pound from 160.70 cents a week earlier. On liffe, Robusta for November increased to $2,099 a ton from $2,043.

Cocoa: Prices fell on profit-taking, having soared the previous week to ten-month highs on supply worries in major producing nations in Africa.

By Friday on liffe, cocoa for delivery in December recoiled to £1,695 a ton from £1,736 a week earlier.

On the NYBOT-ICE, cocoa for December dipped to $2,634 a ton from $2,693.

Rubber: Prices rose on active buying from major tyre-makers. The Malaysian Rubber Board’s benchmark SMR20 ended the week higher at 275.95 US cents a kilo from 254.15 cents the previous week.—AFP