LONDON, 24 August 2003 — Oil prices rose still higher over the week, as markets were rocked by the deadly bombing of the United Nations’ headquarters in Baghdad as well as a worrying drain to US petroleum stockpiles. Precious metal prices also stayed strong, with gold keeping the bulk of recent gains despite a rising US dollar, and platinum approaching a near-quarter century high.
GOLD: Gold maintained the bulk of its currently lofty price over the week, backed up by both physical and technical buying, although it was partly pegged back by the strong rise of the US dollar.
On the London Bullion Market, the price of an ounce of gold stood at $359.65 on Friday afternoon, against $364.50 the previous week.
There was now “a steam behind gold”, said Ross Norman from specialist website TheBullionDesk.com. “It is showing remarkable robustness bearing in mind dollar strength at the moment,” he said.
The US dollar has gained strongly in value over the week, making gold more expensive to non-US purchasers since the metal is denominated in dollars.
While there was some speculative buying going on, the price “is not purely speculative in nature,” Norman said. “We feel that it has the scope to test 367 (dollars), a breach of which sees us at 375 and then into the 400s.”
SILVER: Silver also largely preserved its recent gains, although the metal took somewhat of a back seat over the week, with gold and platinum hogging the bulk of attention.
On the London Bullion Market on Friday silver prices stood at $4.985 per ounce against $5.015 the previous week. “Silver remains in the background for the moment, although gains in gold have seen traders flirt with the five-dollar resistance level,” said James Moore from TheBullionDesk.com.
A series of positive economic statistics in the United States had also helped, “as the US’s industrial manufacturing base will undoubtedly benefit from a stronger economy,” he added.
PLATINUM AND PALLADIUM: Both platinum and palladium soared in value over the week, with the former storming past $700 an ounce to flirt with a 23-year high of $708 before falling back again.
By Friday afternoon, the price of an ounce of platinum was at $698 from $699.5 a week before. “At current levels, the price is above and beyond what we could expect from market fundamentals, which are steady at the moment,” said Ross Norman from TheBullionDesk.
“We believe that the current buying spree represents some of the speculative players.” Palladium stood at $185 an ounce against $176 the previous week.
BASE METALS: Economic optimism and strong demand rallied base metals over the week, with nickel in particular climbing to a new three-year high. “There is very strong demand, particularly out of China, and a distinct lack of supply growth,” Macquarie Bank analyst Adam Rowley said of nickel.
“There is a chronic shortage developing, it looks like it is going to get considerably worse over the next two years.” Overall, there was “a little bit more confidence generally in the economic recovery story,” Rowley added. “This is positive for commodities and there is a bit more buying coming in as a result.”
Late on Friday on the London Metal Exchange (LME), three-month copper prices stood at $41,782 per ton against 1,750 a week earlier. Three-month aluminum prices rose to $1,442 per ton from 1,429.50.
Three-month nickel prices soared to $9,600 per ton from $ 9,240. Three-month zinc prices edged down to $818 per ton from $823. Three-month lead prices gained to $497 from $481. Three-month tin prices strengthened to $4,915 per ton from $4,830.
OIL: Oil prices rose yet higher, touching five-month peaks on concerns including the rapidly-unraveling security situation in Iraq, fears of unrest in Nigeria and Venezuela, and principally, worries about draining US gasoline stocks.
Prices spiked higher on Thursday after weekly figures from the US Department of Energy had shown yet another fall in inventories of both crude oil and gasoline. Of particular worry were gasoline stockpiles, which are at their lowest level for nine months.
Although gasoline reserves typically decline in summer as US drivers take to the roads for holidays, they are now 6.1 percent lower from the same time last year. “It looks like gasoline prices are pulling crude prices up,” Commerzbank analyst Jon Rigby said.
Also supporting prices was the increasing realization that Iraqi oil will take longer than even pessimists initially thought to return to world markets in sizeable amounts.
The week began with the news of a sabotage attack on the main oil pipeline from northern Iraq to Turkey, likely to put it out of action for up to a month.
On Tuesday, the current inability of the US-led governing coalition to bring order to Iraq was bloodily emphasized when a huge truck bomb killed at least 23 people at the United Nations headquarters in Iraq, including the UN envoy. Additionally, ethnic unrest in southern Nigeria’s oil city of Warri sparked fears of a repeat to trouble which shut down 40 percent of the country’s oil exports earlier this year.
In Venezuela, there were renewed fears that unrest connected to an opposition bid to unseat President of Hugo Chavez could bring that country’s oil exports to a halt, as happened early this year.
By Friday, the price of benchmark Brent North Sea crude oil for October delivery stood at $29.74 a barrel in London from $29.08 a week earlier. In New York, the reference light sweet crude September contract rose to $31.82 per barrel from $30.99.
RUBBER: Rubber prices continued their upward march as strong buying interest from China and the hampering of harvests by heavy rains in Asia combined to tighten the market. “There appears globally to be more demand for rubber than supply,” said Chris Caiger from brokers Symington, saying that “steady” buying from China had been nudging prices up all month.
“Raw materials and production are not as good as they should be for this period of time — there are still a lot of rains in the Far Eastern region, which is hampering the collection of production,” he added.
In Kuala Lumpur, the RSS 1 index rose to 3.840 ringgit per kilo on Thursday from 3.780 ringgit the previous week.
COCOA: Cocoa futures gained strongly on fears that poor weather conditions and continued unrest in Ivory Coast could affect supplies. “They warned the other day that the 2003 04 main crop, which starts harvesting in September, could be lower than expected because of lower than average rainfalls,” said analyst Martin Pratt from brokers Sucden.
“There are also tensions in the country between immigrant farmers and local ones, which we are worried could lead to full-scale war and interruption of harvests.”
On LIFFE, London’s financial futures exchange, the price of cocoa for December delivery firmed to 1,037 pounds a ton on Thursday from 967 the previous week.
On the CSCE, the New York futures market, the December contract gained to $1,597 per ton from $1,481.
COFFEE: Coffee prices perked up slightly, in part due to a technical bounce back from earlier falls, but also because of worries about upcoming crops in major world producer Brazil. “Coffee futures rebounded off lows as the downward thrust ran out of energy and reversed on renewed fund buying,” said analyst Ann Prendergast from brokers Refco.
“Additionally, below normal rainfall is giving rise to concern about the potential state of the (Brazilian) 2004 05 crop,” she added.
On LIFFE, Robusta quality for September delivery stiffened to $719 per ton from $709 the previous week. On New York’s CSCE market, Arabica for September delivery gained to 61.10 cents a pound from 60.45 cents the previous week.
SUGAR: Sugar prices stabilized after the previous week’s falls, with trading dominated by technical considerations in the absence of fresh news. On LIFFE, the price of a ton of white sugar for October delivery slipped back slightly to $197 from $198.20 a week earlier.
On the CSCE in New York, a pound of unrefined sugar for October delivery edged down to 6.48 cents from 6.51 the previous week.
GRAINS AND SOY: Grain and soy prices mainly rose as a heat wave in US growing areas hit production, although wheat prices gained somewhat less due to investment fund selling. Soy in particular was affected by unrelenting heat and dryness in the US Midwest region.
On LIFFE, the price of a ton of wheat for September delivery rose to 87.70 pounds from 85.50 pounds a week earlier.
