LONDON, 1 February 2004 — Oil prices fell heavily this week as supply worries abated despite news of another fall in US inventories. Gold prices sank to a two-month low point as the dollar battled back, sending precious metals into reverse across the board.
Gold: Gold prices fought to hold above the $400 threshold after the US unit rebounded on signs that the Federal Reserve is steering towards an interest rate rise. “Volatility will remain high over the coming sessions with the currency markets still providing a great deal of market direction,” said James Moore, analyst at TheBullionDesk.com specialist website. Gold prices stormed up to 15-year highs around $430 per ounce in early January as the greenback’s fall prompted a flight to hard assets and made dollar-traded gold more attractive to non-US buyers. But by Friday afternoon, gold prices stood at $399.75 an ounce on the London Bullion Market against $409 a week earlier.
Silver: Silver prices eased in step with gold. The silver price stood at $6.225 per ounce on the London Bullion Market on Friday against $6.345 a week earlier. “The next moves from here are anyone’s guess with the market still largely influenced by golds moves,” said Moore at TheBullionDesk.com.
Platinum and Palladium: The platinum group metals sank as the dollar’s rebound triggered selling by speculative funds across the precious metals markets. “The liquidation seen across the metals was too much for platinum and its strong support at $850 finally broke,” said Barclays Capital analyst Kamal Naqvi.
Palladium also fell heavily from the upper end of its recent trading range, with the outlook hinging on whether producer selling continues. By Friday, the platinum price stood at $837 per ounce on the London Platinum and Palladium Market against $865 a week earlier. Palladium traded at $230 an ounce from $239.
Base Metals: Base metals remained more resilient in the face of the dollar’s bounce back, as supply worries lent support, analysts said. “Base metals remain buoyed by consumer hedging and continued price supportive supply news as BHP Billiton confirmed that the return to full production at Escondida (the worlds largest copper mine) is slow,” said Ingrid Sternby, another analyst at Barclays Capital. Phelps Dodge, the world’s second largest copper producer, announced a potentially price-negative move to restart capacity it curtailed in response to weak market conditions over the past few years.
By Friday, three-month copper prices had risen to $2,470 per ton on the London Metal Exchange from $2,448.5 a week earlier. Three-month aluminum prices firmed to $1,647 per ton from $1,634.5. Three-month nickel prices gained to 14,950 per ton from $14,730. Three-month zinc prices edged up to $1,021 per ton from $1,048. Three-month lead prices strengthened to $767 per ton from $754. Three-month tin prices rose to $6,500 per ton from $6,275.
Oil: Oil prices tumbled from recent post-Iraq war highs as worries about potential supply shortages during the US winter eased. Expectations of a thawing of Arctic weather in the US northeast, which found US crude oil stocks already at a 28-year low, were seen as the prime factor behind the decline. The falls came despite a report from the US Department of Energy estimating that US commercial crude oil inventories dropped 1.5 million barrels in the week ended Jan. 23.
Distillate inventories — diesel fuel and heating oil — slumped by 4.5 million barrels, it said. Motor gasoline stocks dropped by 3.5 million barrels, according to the government data.
By Friday, the price of benchmark Brent North Sea crude oil for March delivery stood at $29.31 a barrel in London from $30.93 a week before. In New York, the reference light sweet crude March contract was at $33.05 against $34.70 a week earlier.
Rubber: Rubber prices held steady despite a pick up in trade after the end of the Lunar New Year holiday. In Singapore the RSS 3 contract for March closed at 126.50 US cents on Friday against 126.25 a week earlier.
Cocoa: Coffee futures lost ground as rumors of an improved harvest from leading producer Ivory Coast spooked the market. “Fundamentally, the market was torn between adequate arrivals and intimations of a smaller crop,” said analyst Ann Prendergast from the Refco brokerage.
On LIFFE, the price of cocoa for May delivery fell to 915 pounds a ton on Friday from 930 pounds a week before. On the CSCE, the New York futures market, the March contract dropped to $1,550 per ton from $1,609 the previous Friday.
Coffee: Coffee prices ended the week slightly lower as traders locked in profits after prices rose to the highest level for three years in New York, and for one year in London, at the start of the week.
On LIFFE, Robusta quality for March delivery retreated to $761 per ton on Friday, from $804 a week earlier. On New York’s CSCE market, Arabica for March delivery dipped to 72.95 cents a pound from 74.45 cents the previous Friday.
Sugar: Sugar prices advanced again as traders remained optimistic about the prospect of heavy Chinese buying of imports after the Lunar New Year holiday, to plug a domestic supply shortfall, analysts said. On LIFFE, the price of a ton of white sugar for March delivery rose to $195.30 on Friday from $188.80 the previous week. On the CSCE in New York, a pound of unrefined sugar for March delivery gained to 5.82 cents from 5.77 cents the previous Friday.
Grains and Soya: Grain and soya prices were undermined by worries about the impact of a deadly bird flu that has swept across Asia. In Chicago, the price of wheat for March delivery stood at 385 cents a bushel on Friday from 381.5 a week earlier. On LIFFE, wheat for March fell to 105.5 pounds a ton from 108.00 pounds. In Chicago maize for March delivery slipped to 272.50 cents a bushel from 277 cents. Soybeans for March delivery wilted to 807 cents a bushel from 839.25. March-dated soybean meal — used in animal feed — declined to $251.5 per ton from $264.3.
Cotton: Cotton futures sank as speculative funds shunned the market in the absence of any significant positive news, analysts said. “Spec players were once again into liquidating their contracts,” said Prendergast. New York’s March contract declined to 70.00 cents a pound on Friday from 75.94 pounds a week earlier. The Cotton Outlook Index of physical cotton, the average of the world’s lowest prices, weakened to 76.20 cents from 76.70 cents.
Wool: Wool deterred buyers, though hopes of Chinese purchases provided some support. The Australian Eastern index slipped to 7.89 Australian dollars per kilo on Thursday from 8.11 dollars the previous week. The British Wooltops index edged down to 475 pence from 479.