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LONDON, Jan 18: Oil prices soared to levels not seen in nearly two years this week as a jittery market speculated that the United States could use the discovery by UN arms inspectors of empty chemical warheads in Iraq as a trigger for war.
The consequent ratcheting up of pressure on Iraq was accompanied by news that US crude oil stock levels had sunk to their lowest level in 27 years as a seven-week-old strike in Venezuela tooks its toll.
Worries over a possible Middle East conflict sent gold prices spiralling higher to levels not seen in almost six years, boosted also by a slide in the value of the dollar.
ase metals prices were also in demand as recent signals that the US economy may be on the road to recovery helped bolster demand, with the weaker dollar again cited as a contributing factor.
GOLD: Gold prices surged to the highest level in nearly six years as concerns over the threat of war in Iraq triggered safe-haven demand for gold a gainst a backdrop of a weaker US dollar.
By Friday afternoon, an ounce of the precious metal was fixed at 357 dollars per ounce against 353 dollars the previous week.
Earlier Friday the gold price surged to 358.55 — its highest level since March 1997.
Prices were marked up after UN weapons inspectors said late Thursday they had found 11 empty chemical warheads at an Iraqi munitions dump.
Prices of gold were going down this week and suddenly we got the news of the finding in Iraq, said SG Securities analyst Stephen Briggs.
Moore said that despite the recent sharp rise in gold prices gold is up around 13 per cent since the start of December, and almost 40 per cent up in the past two years — the metal had yet to decisively break out of a 22-year downtrend.
But he added that if gold could continue to hold above $355 that key technical level would effectively have been breached.
If that happens I think there’s a lot of room on the upside, possibly up to 418-420 (dollars), Moore said.
Analysts said the ongoing fall in the value of the dollar against other leading currencies was helping to fuel the gold price rally.
A decline in the value of the dollar against other currencies makes gold more attractive to international investors because the metal is priced in dollars on world markets.
SILVER: Silver prices fell on profit taking after riding up on the back of the rise in gold prices in recent weeks.
Analysts said silver continued to underperform its more expensive cousin.
Silver is doing nothing independently from gold, it goes up a bit when gold goes up, but it is... lagging behind, said SG Securities analyst Stephen Briggs.
Silver was fixed on the London Bullion Market at $4.812 an ounce on Friday afternoon against 4.84 the previous week.
PLATINUM AND PALLADIUM: Platinum prices built on the previous week’s gains, but palladium prices succumbed to profit taking after a strong rally the previous week on the back of supply concerns ran out of steam.
By Friday, an ounce of platinum had firmed to $627 on the London Platinum and Palladium Market from 620 dollars the previous week.
Thebulliondesk.com’s Moore said platinum had worked its way to the top end of the $605-625 range, thanks partly to a weaker dollar/yen exchange rate.
Palladium fell to $259 per ounce from $267.
BASE METALS: Base metals prices forged ahead for the third week running as recent signs the world economy may at long last be on the mend helped tea se out fresh buyers against a backdrop of further dollar weakness.
The market is factoring in a favourable economic recovery, said GNI analyst Lawrence Eagles. We’re seeing some quite strong demand in the United States.
But he said most experts were still not sure what was behind the pick-up in demand.
It may be it’s just that they (US industry) ran down orders ahead of Christmas and it’s just a bit of a new year pick-up, Eagles said.
Analysts cautioned that the market could be jumping the gun given that signs of US economic recovery were still so patchy.
On the London Metal Exchange (LME), three-month copper prices rose to 1,675 dollars per tonne from 1,643 dollars the previous week.
Three-month nickel prices rose $50 per ton to $7,960 per ton.
Three-month aluminium prices climbed $21 per ton to $1,374.
Elsewhere in the complex, three-month lead prices added $12 per ton to $458, tin won $30 per ton to $4,465 and zinc prices firmed $17 ton to $802.
OIL: Oil prices resumed their rally as concerns about a possible war in Iraq and a strike in Venezuela outweighed a decision by the OPEC oil cartel to raise output to try to curb soaring prices.
On Friday, the price of benchmark Brent North Sea crude oil for March delivery stood at $30.03 a barrel, against $28.73 a week earlier.
In New York, February-dated light sweet crude futures traded at $32.26 from $31.55 a week earlier.
World oil prices shot up to a two-year peak on Thursday on news that UN weapons inspectors had uncovered 11 empty chemical warheads in Iraq, stoking worries about a US-led war in the Middle East oil producer, though prices later eased somewhat.
The renewed oil price rally wiped out any brief relief for oil consumers provided at the start of the week by a decision by the Organization of Petroleum Exporting Countries (Opec) to raise its oil output ceiling by 1.5 million barrels per day from February.
The Opec move aims to compensate for a strike in Venezuela that has crippled the country’s oil shipments, draining the United States’ oil stock levels down to levels that have set alarm bells ringing in the world’s biggest oil consumer.
Analysts say that if war chokes off Iraqi exports before the Venezuelan strike is resolved, the combined loss to world oil markets would be around five million barrels of crude per day.
Opec capacity outside of Iraq and Venezuela is about 25 million barrels a day and that’s how much oil you need to balance the market in the first quarter, said Deutsche Bank analyst J J Traynor.
So if you lose Iraq as well with Venezuela still on strike, then there’s a lot of concern about whether there’s enough available capacity and how quickly it can all come on stream.
The fear of that is what’s pushed the oil price over $30. Underneath that inventories are extremely low, Traynor added.
RUBBER: Rubber prices bounced higher amid supply concerns, while demand remains robust, traders said.
There have been some concerns over supply lately, said Symington analyst Martin Hampson.
He said rains had disrupted output in producer regions in late December and early January, while the Chinese New Year at the start of February would also cause activity to slow.
In Kuala Lumpur, the RSS index rose to 3.330 ringgit per kilo from 3.280 the previous week.
COCOA: Cocoa futures dropped after the Ivory Coast government and two rebel groups signed a truce on Monday, boosting hopes for an end to a ruinous four-month war in the world’s top cocoa grower.
The market is still turned towards the Ivorian issue and even the smallest incident over there influences prices,” said ABN Amro trader Jean-Michel Boehm.
COFFEE: Coffee prices gained ground on the prospect of a fall in the size of the 2003/04 crop in Brazil compared with the previous harvest.
The massive 2002/03 crop is done and out of the way and traders are looking toward the 2003/04 crop, which is expected to be one third the size of the previous crop, and anticipating a developing shortage of Arabica coffee as the season progresses, said Refco analyst Ann Prendergast.
SUGAR: Sugar prices had a choppy week caused by speculative pressures.
The (New York) market continues to trade in volatile session, with choppy moves up and down within the range of 7.25 (cents per pound) and 7.75, said Czarnikow analyst John Kovaks
SOYA: US soya prices fell sharply, undermined by favourable weather in producer regions in South America which are expected to boost harvests, said AG Edwards analyst Victor Lespinasse in Chicago.
That helped offset the positive influence of weekly export figures from the US agriculture department showing solid demand for soya, notably from China.
On the Chicago Board of Trade (CBoT), a bushel of soya for March delivery eased to 549 cents from 578.75 the previous week.
Soyabean meal used in animal feed for March delivery fell to $162.40 per ton from 170.40 the previous week.
GRAINS: Grain prices recoiled on selling by investment funds after a report on US production and sowings of winter wheat from the US agriculture department left markets disappointed, traders said.
Forecasts of snow in some US producer regions should also help the winter wheat crops by protecting them from frost and restoring moisture to the ground,said AG Edwards analyst Victor Lespinasse in Chicago.
In Chicago a bushel of wheat for March delivery eased to 311 cents on Thursday from 329 cents a week earlier.
A bushel of maize in Chicago for March delivery eased to 230.75 cents from 243.50 the previous week.
On LIFFE, the price of a ton of wheat for January delivery edged up to 59.50 pounds from 59.30 a week earlier.
COTTON: Cotton prices were supported by solid US exports, with exporters cashing in on a softer dollar, analysts said.
The market remains supported by international prices and improving exports (which could benefit from the weakening dollar), said Refco analyst Ann Prendergast.
In New York, the March contract firmed to 51.52 cents a pound on Thursday from 51.06 the previous week.
The Cotton Outlook Index of physical cotton, the average of the world’s lowest prices, inched up to 57.0 cents from 56.70.
WOOL: Australian wool prices shed some of the gains seen the previous week when auctions had resumed in strong fashion after the Christmas break.
In a more subdued market, prices decreased by 0.9 per cent on average at sales in Sydney and Melbourne this week, following last week’s season-high, the Australian Wool Industries Secretariat reported.
The Australian Eastern index slipped to 11.79 Australian dollars per kilo from 11.89 the previous week.
The British Wooltops index climbed to 579 pence from 570 pence a week earlier.—AFP
