Gold
By the end of last month, gold climbed to $374.40 per troy ounce, its highest in 15 weeks. The precious metal has benefited from its inverse relationship with the US dollar, whose depreciation has sent prices up by $55 since the start of April.
Some analysts believe gold is set to rise further, driven not by dollar weakness but by demand from Asian following a plan by the Chinese government to allow individuals to trade gold. China is allowing its citizens to invest in gold as a means of recycling the trade surplus and keeping upward pressure off their currency.
The dollar’s plunge this year has been matched by strengthening of gold prices as investors have searched for alternative assets to place their money.
Renewed fears of global terror attacks and ailing world economy have aided gold’s latest climb, whisking the precious metal away from a low of $318.75 in early April to a new four-month peak of $374.40 on May 27.
Oil
Oil prices have gained as the latest weekly US inventory report showed petrol stocks sharply lower than expected, just as the demand for motoring fuel is set to rise with the start of the summer driving season.
Oil prices were also pushed higher by talk that Opec may hold production at current levels and not make any further cuts at its June 11 meeting because of the prospect that Iraq would not resume output in the near future. The fact that Iraq is not back and is not looking like it will be back for some time is fairly bullish for oil prices, said Adam Sieminski, oil analyst at Deutsche Bank.
The Energy Information Administration said petrol inventories were down by 3.4 million barrels versus analysts expectations of a 175,000 barrel build. The drop in fuel stocks increase pressure on crude stocks, which are down more than 11 per cent from the level a year ago.
Meanwhile, Iraq which provided some four per cent of globally traded oil before the war, is yet to start exporting. Iraq is aiming to produce some 1.5 million barrels per day (bpd) by mid-June and export roughly half of that but analysts say security problems at oilfields and damage due to post-war looting could make this timetable tough to meet.
Traders are also watching the Organization of Petroleum Export Countries for signals on whether a supply cut decision is likely when the group meets on June 11 in Qatar.
While some Opec states have indicated a cut is possible in order to accommodate the return of Iraqi barrels, the recent price rise, possibly delays to Iraqi exports and weak inventory levels have called the need for a cut into question.
Analysts said that at current prices Opec may choose to delay supply curbs rather than cause a further price spike. Prices are now close to the top of Opec’s $220-$28 per barrel target range, mostly due to concerns over the low US inventories.
The International Energy Agency said recently that Opec should resist calls for further oil supply cuts at the June meeting and help replenish lean industry stocks.
Opec kingpin Saudi Arabia was quoted as saying that Iraq should be allowed to let its output recover to the pre-UN sanctions level of about 3.5 million bpd, before being assigned a new Opec quota.
Baghdad’s exports have been excluded from Opec’s quota system since United Nations sanctions were slapped on Iraq after its invasion of Kuwait in August 1990. It sold crude oil under the UN oil-for-food exchange.
The other 10 members of the Organization of the Petroleum Exporting Countries have a production ceiling of 25.4 million bpd, effective June 1.
Nickel
Nickel prices have risen to their highest level since March, fuelled by a possible strike at Canada’s Inco, the west’s biggest supplier. Also, there is tightness bubbling on the London Metal Exchange. The LME three months price have risen to over $8,805 a tonne.
Inco threat strike followed on from a labour dispute earlier this year at Russia Norilsk the world’s largest producer, and took place against a background of strong demand for nickel from its main end-use sector - stainless steel.
Nickel peaked at $9,140 a tonne on February 26, its highest since June 2000 when the market was driven to $10,450 in the run-up to the previous Inco contract expiry.
Coffee
In the week ended May 24-25, coffee prices rose on talks of frost in Brazil. The last frost in Brazil’s southern coffee growing region in 1994 had caused prices to more than triple.
But since then the threat of freezing weather has receded because the coffee growing areas have moved north to the warmer irrigated regions.
The move has led to an increase in Brazilian coffee production, rising by two-thirds to an estimated 46.9 million, 60kg bags in the past nine years. The higher output and Vietnam’s emergence as the world’s second largest producer has contributed oversupply. The International Coffee Organization, the industry body, estimated more than 20 million bags were sitting in warehouses around the world at the end of last year — just under a fifth of world production.
The surplus has led to a plunge in prices. The World Bank estimates coffee farmers are receiving the lowest prices in 100 years, once inflation and currency fluctuations are taken into account.