Commodities boosted by dollar, emerging market demand
Commodity prices were boosted this week by the weak dollar and strong emerging market demand, alongside solid economic growth and expectations of more stimulus measures in the United States.
Star performer cotton stuck a record high in New York, propelled also by poor weather in key producing nations. Elsewhere, soya and tin scored two-year peaks as both commodities were lifted by keen demand and tight supplies.
The dollar hit a new 15-year yen low Monday on hopes the US Federal Reserve could deliver more stimulus next week in a second round of so-called quantitative easing measures, known as QE2.
A struggling greenback makes dollar-priced commodities cheaper for buyers holding stronger currencies and therefore tends to stimulate demand and prices.
"Weakness in the dollar is driving up crude oil and all the commodities, including gold, silver (and) copper," said Andy Lipow at Lipow Oil Associates.
However, the dollar strengthened towards the end of the week as traders scaled back their expectations of monetary easing.
The prospect of QE2 could help protect economic growth and support raw material prices in the longer term, according to Bjarne Schieldrop, head of commodity research at Swedish banking group SEB.
"Even though the main demand driver in commodities are the emerging markets, commodity prices would not be able to remain at the current elevated level if (leading industralised nations) moved into a double dip," Schieldrop said.
"QE2 has substantially reduced the double dip (recession) probability, and developed markets are thus expected to offer a good demand base for commodities going forward."
OIL: World oil prices churned higher as traders digested newsflow on the US economy and the faltering dollar.
"The oil market is on standby, struggling for direction," said analyst Myrto Sokou at the Sucden brokerage in London.
"Crude oil prices have consolidated around 82 dollars per barrel area this week, while investors were prompted to lock in recent profits ahead of the Fed meeting and the mid-term US elections next week."
The market was lifted on Tuesday by a modest rise in US consumer confidence, which is regarded as the main driver of the economy.
Prices pulled back slightly on Wednesday as the dollar regained some strength, and after a mixed US energy inventories report.
Oil rebounded somewhat as traders absorbed a surprise drop in weekly job claims which bolstered confidence in the US economic recovery.
And official data showed Friday that US gross domestic product (GDP) grew two percent in the third quarter, after slowing to an annual rate of 1.7 in the second quarter.
"It should be remembered that today's US Q3 GDP is the first official estimate and should be taken with a pinch of salt," cautioned Schieldrop.
By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in December gained to 83.31 dollars a barrel from 82.10 dollars a week earlier.
On the New York Mercantile Exchange, Texas light sweet crude for December rose to 81.70 dollars a barrel from 80.61 dollars.
COTTON: Cotton struck a new record at 1.3050 dollars a pound in New York, as bad weather hampered harvests in China and the United States.
"Cotton prices have soared to new record highs as poor weather in China and the US have put crops at risk," said CMC Markets analyst Michael Hewson.
"Prices are expected to remain high though forthcoming good Indian harvests is expected to boost supply and limit price rises in the longer term."
Cotton has pushed higher in recent months, driven also by lower production in Pakistan after devastating floods and the monsoon season in India. The two countries are among the world's largest producers.
By Friday in New York, cotton for December rose to 1.2384 dollars a pound from 1.1971 a week earlier.
PRECIOUS METALS: Gold, which hit record peaks earlier this month, continues to enjoy support from its safe-haven status and is on a positive long-term price trend, the World Gold Council said.
"The gold market continued to be supported by concerns over the health of the global economy and its ability to show a sustained recovery, especially in developed nations," the industry body said in a quarterly report.
"These concerns, particularly when coupled with risks surrounding potential extensions to quantitative easing and supportive central bank activity, have sustained investment inflows leading to a robust quarterly gold price performance."
By late Friday on the London Bullion Market, gold rose to 1346,75 dollars an ounce at the late fixing, from 1,322.50 dollars a week earlier.
Silver gained to 23.96 dollars an ounce from 23.05 dollars.
On the London Platinum and Palladium Market, platinum soared to 1,700 dollars an ounce from 1,673 dollars.
Palladium rallied to 640 dollars an ounce from 586 dollars.
BASE METALS: Copper hit a two-year peak, while zinc and lead forged their highest levels since January, before the industrial metals ran into profit-taking and fell as the greenback staged a modest rebound.
"Prices retreated this week, in a correction lower, as profit-taking emerged following a stronger US dollar, amid expectations of a second round of a large quantitative easing program from the Fed," added Sokou.
By late Friday on the London Metal Exchange, copper for delivery in three months fell to 8,198 dollars a tonne from 8,330 dollars a week earlier.
Three-month aluminium eased to 2,340 dollars a tonne from 2,382 dollars.
Three-month lead sank to 2,449 dollars a tonne from 2,534 dollars.
Three-month tin dropped to 25,675 dollars a tonne from 26,300 dollars from a week earlier.
Three-month zinc fell to 2,428 dollars a tonne from 2,527 dollars.
Three-month nickel slipped to 22,920 dollars a tonne from 23,400 dollars.
COFFEE: Coffee prices touched another 13-year high at 204.60 cents in New York on stubborn supply concerns.
By Friday on the New York Board of Trade (NYBOT), Arabica for delivery in December rallied to 202.60 cents a pound from 199.25 cents the previous week.
On LIFFE -- London's futures exchange -- Robusta for January jumped to 1,959 dollars a tonne from 1,883 dollars.
COCOA: Cocoa futures eased as traders cashed in recent gains.
By Friday On NYBOT, cocoa for delivery in December dipped to 2,801 dollars a tonne from 2,845 dollars a week earlier.
On LIFFE, cocoa for December weakened to 1,858 pounds a tonne from 1,908 pounds.
SUGAR: Prices hit their best levels since February.
"Despite the rebound in Indian sugar production as well as higher Brazilian output, the thin level of inventory cover and near-term constraints are likely to keep prices well supported in the fourth quarter," said Barclays Capital analyst Sudakshina Unnikrishan.
By Friday on NYBOT, the price of unrefined sugar for delivery in March climbed to 29.09 US cents a pound from 28.26 cents a week earlier.
On LIFFE, the price of a tonne of white sugar for December jumped to 723.20 pounds from 708.10 pounds.
GRAINS AND SOYA: Soya prices struck a two-year pinnacle as demand outstripped supplies, hitting 12.48 dollars a bushel -- which was the highest point since September 2008.
"Even though we have a big crop, the demand outweighs the supply at this moment," said analyst Frank Cholly at brokerage Lind-Waldock.
"The dollar and other markets are definitely a supportive factor, but the fundamentals on these markets are strong enough on their own."
By Friday on the Chicago Board of Trade, January-dated soyabean meal -- used in animal feed -- rose to 12.32 dollars a bushel from 12.11 dollars.
Maize for delivery in December climbed to 5.80 dollars a bushel from 5.60 dollars the previous week.
Wheat for December rallied to 7.18 dollars a bushel from 6.70 dollars.
RUBBER: Malaysian rubber prices dipped, after hitting a recent record peak.
The Malaysian Rubber Board's benchmark SMR20 fell to 388.05 US cents per kilo, from 388.80 cents last week.
© 2010 AFP