Gold price shines, copper melts on China, Ukraine fear

14th March 2014, Comments 0 comments

Gold prices struck six-month highs this week but copper futures tumbled to the lowest level in nearly four years on market concerns over slowing Chinese economic growth.

Investors sought haven investments such as gold also because of the Ukraine crisis and as the euro spiked to a 29-month peak at almost $1.40 on Thursday.

Crude oil futures meanwhile dropped also on China growth worries, while tight supplies continued to lift the value of soft commodities coffee and cocoa.

PRECIOUS METALS: Gold extended its recent run higher, reaching a six-month high at $1,388.11 an ounce on Friday.

Gold is regarded as a safe investment in times of economic or political uncertainty.

"It is not just the Chinese concerns that are driving gold prices higher. The situation in Ukraine ... is getting worse," noted Fawad Razaqzada, analyst at traders Forex.com.

China on Thursday said that its industrial output rose 8.6 percent year-on-year in January and February, the slowest rate since April 2009.

At the same time retail sales, a key indicator of consumer spending, were up 11.8 percent, but also the worst performance for several years.

The data added to speculation that the Chinese economy -- a crucial driver of regional and global growth -- is slowing and comes days after officials announced a surprise trade deficit in February.

Elsewhere, the United States and Russia on Friday failed to resolve a Cold-War-style crisis sparked by Moscow's military intervention in Crimea and the Ukrainian peninsula's weekend referendum on joining Kremlin rule.

By late Friday on the London Bullion Market, the price of gold jumped to $1,385 an ounce from $1,335.25 a week earlier.

Silver dipped to $21.36 an ounce from $21.38.

On the London Platinum and Palladium Market, platinum gained to $1,478 an ounce from $1,474.

Palladium grew to $780 an ounce from $776.

BASE METALS: Copper prices slumped for a second week running on poorly-received data from China, the world's top consumer of base or industrial metals, striking the lowest level for almost four years.

Copper sunk to $6,376.25 a tonne, a depth not reached since June 2010.

Lead and tin struck eight-month lows.

"Over the past two weeks, fears of a significant slowdown in Chinese economic growth have clearly re-emerged as credit conditions in the country have tightened and commodity prices have sharply declined," said analysts at Jefferies financial group.

By Friday on the London Metal Exchange, copper for delivery in three months tumbled to $6,469 a tonne from $6,854 week earlier.

Three-month aluminium dropped to $1,733.50 a tonne from $1,766.75.

Three-month lead retreated to $2,032.50 a tonne from $2,108.

Three-month tin fell to $23,000 a tonne from $23,100.

Three-month nickel increased to $15,921 a tonne from $15,388.

Three-month zinc slipped to $1,979.25 a tonne from $2,070.75.

- Crude oil prices slide -

OIL: Prices slid this week on market concerns over slower growth in China, the world's biggest energy consumer, that overshadowed hikes to demand forecasts from OPEC and the International Energy Agency.

Myrto Sokou, senior research analyst at Sucden brokers, said that "disappointing Chinese economic data weighed... and offset any support from the ongoing tensions in Ukraine".

Oil prices had slumped midweek in New York after news of a bigger-than-expected build in US crude inventories and as Washington said it planned to release some strategic reserves onto the market.

The US Department of Energy's weekly petroleum report showed crude-oil inventories rose for the eighth week in a row.

US crude inventories climbed by 6.2 million barrels to 370 million barrels in the week ended on March 7, more than triple the increase estimated.

The Department meanwhile said that a decision to release five million barrels from its Strategic Petroleum Reserve was a long-planned test, amid speculation it related to the Ukraine crisis.

Oil prices spiked earlier this month on the standoff between the West and Russia over Ukraine, which has seen a wave of street protests ending up with the ouster of Ukraine's pro-Kremlin president Viktor Yanukovych.

Russian troops have since seized control of Crimea, a small peninsula home to a mainly ethnic Russian population. The region will hold a referendum on Sunday to decide if it will join Russia or remain in Ukraine.

Concerns remain that potential Western sanctions against Russia could disrupt oil supplies from the country, a major energy producer and exporter of natural gas to Europe.

More than 70 percent of its gas and oil exports to Europe pass through Ukraine.

Elsewhere this week, the OPEC oil-producers cartel said that it expects world demand of 91.1 million barrels per day this year, 1.1 mbpd more than in 2013, amid increased supplies from its member countries.

Previously the Organization of Petroleum Exporting Countries, which produces about 35 percent of the world's oil, had expected demand to grow by 1.09 mbpd.

The International Energy Agency on Friday forecast that demand would climb faster than expected as the world economic outlook improves.

But the IEA, which advises countries on energy policy, also noted that the crisis in Ukraine could still drag down overall consumption.

By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in April dropped to $107.58 a barrel from $108.54 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for April slumped to $98.78 a barrel from $102.52.

- Coffee, cocoa futures rally -

COFFEE: Prices extended their run to fresh highs as drought conditions continued to affect production in major producers Brazil and Vietnam.

"The concerns about the Brazilian coffee supply have driven the price of Arabica coffee up by around 80 percent since the end of January," said analysts at Commerzbank in a note to clients.

"The prices of Robusta coffee were also pulled upwards... by reports of above-average drought conditions in key growing areas of Vietnam."

Arabica-quality coffee reached 209.75 US cents a pound on Wednesday, the highest level for more than two years.

Robusta hit a near 18-month peak at $2,218 a tonne this week.

By Friday on the ICE Futures US exchange, Arabica for delivery in May advanced to 203.75 US cents a pound from 196.05 cents a week earlier.

On LIFFE, London's futures exchange, Robusta for May rallied to $2,176 a tonne from $2,076.

COCOA: Prices returned to higher ground, striking fresh 2.5 year highs on the back of stretched global supplies.

Cocoa reached £1,888 a tonne in London and $3,027 a tonne in New York.

"After falling in the second half of February, cocoa prices have resumed their upswing in recent days," said Commerzbank.

"Cocoa is now priced at its highest level since the autumn of 2011 in both London and New York. For the current 2013/14 season, the second deficit in a row is predicted despite the fact that deliveries in West Africa proved surprisingly positive."

By Friday on LIFFE, cocoa for delivery in May grew to £1,879 a tonne from £1,845 a week earlier.

On ICE Futures US, cocoa for May rose to $3,006 a tonne from $2,962.

SUGAR: Prices fell from four-month highs as drought conditions eased in Brazilian sugar-growing areas.

"Weather has improved in sugar areas of Brazil, but overall the region remains too dry," said Jack Scoville, analyst at traders Price Futures Group.

"Rains now could help the crop recoup some of the losses but regular rains will be needed soon."

By Friday on LIFFE, the price of a tonne of white sugar for delivery in May decreased to $460.70 from $484.70 a week earlier.

On ICE Futures US, the price of unrefined sugar for delivery in May fell to 17.59 US cents a pound from 18.31 US cents.

RUBBER: Prices climbed further on sustained demand and tight supply of the commodity.

The Malaysian Rubber Board's benchmark SMR20 rose to 197.35 US cents a kilo from 195.40 cents the previous week.

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© 2014 AFP

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