Investors seeking safety push gold to record highs
Gold spiked to another all-time high this week as slumping global stock markets sent investors fleeing for the safe-haven precious metal while industrial commodities dived on the back of a weak demand outlook.
World equities took another beating on Friday but after massive losses there were some signs of stabilisation as investors tentatively looked for bargains.
Investment bank Morgan Stanley on Thursday warned that the United States and Europe stood dangerously close to recession and that growth in the big emerging economies would be slower than expected.
The bank said a slow European response to the eurozone's mounting sovereign debt problems and the US political battle over raising its debt ceiling had hit financial markets and eroded both business and consumer confidence.
"Our revised forecasts show the US and the euro area hovering dangerously close to a recession -- defined as two consecutive quarters of contraction -- over the next 6-12 months," it said in a report.
Morgan Stanley cut its global economic growth forecast to 3.9 percent in 2011 from the previous 4.2 percent, and to 3.8 percent from 4.2 percent in 2012, mainly due to the stagnation in advanced economies.
PRECIOUS METALS: Gold hit a record $1,878.15 an ounce on Friday, capping a record-breaking week as recession fears mounted.
"With the gold price again reaching a record high ... and with economic woes seeming to carry on for the foreseeable future, the outlook for gold, in its natural safe-haven mode, is strong," said Austin Kiddle at bullion broker Sharps Pixley.
Gold, whose twin drivers are investment and jewellery, is regarded by investors as a safe place to park cash in times of economic uncertainty.
"There is another air of panic out there in the market. The beneficiary once again of this nervousness has been gold," noted Spread Co analyst Ian O'Sullivan.
Meanwhile, the London-based World Gold Council forecast gold would see sustained demand from key markets India and China this year despite high prices.
Global demand for the second quarter to June was 919.8 tonnes, down 17 percent year-on-year, from 1,107 tonnes in the same period last year, as the "remarkably" high European investment seen earlier levelled off.
The WGC, an industry body, said gold demand was still healthy, particularly for jewellery, and expects demand to remain strong for the rest of the calendar year, driven by India and China.
The 2011 June-end quarter was the second-highest quarterly value ever at $44.5 billion, the WGC added in a report.
By late Friday on the London Bullion Market, gold had jumped to $1,848 an ounce from $1,736 the previous week.
Silver advanced to $41.98 an ounce from $38.29.
On the London Platinum and Palladium Market, platinum rose to $1,855 an ounce from $1,800.
Palladium climbed to $750 an ounce from $747.
OIL: World oil prices fell sharply as a new global recession risks reducing demand for energy but then clawed back some lost territory heading into the weekend.
"Fear holds financial markets in a tight grip at the moment and considering the many challenges currently facing most regions of the world and the threat to the continued recovery, this is not surprising," said analyst Filip Petersson at SEB Commodity Research.
London Brent sank as low as $105.06 per barrel and New York hit $79.17 on Friday before both contracts rebounded somewhat.
"We are seeing a very diminished demand picture," said oil specialist John Kilduff at Again Capital. "You're seeing a considerable shift away from the outlook that the economy is going to grow in the second half and next year."
The growth picture was also hurt by poor to outright gloomy US data on jobs, inflation, housing sales and regional manufacturing released Thursday.
The US Federal Reserve Bank of Philadelphia said that manufacturing in the mid-Atlantic states took a sharp hit in August.
The bank said manufacturing activity "dipped significantly," cutting the index to a negative 30.7 in August from a positive 3.2 in July.
Data showing that new claims for US unemployment insurance rose last week also spooked investors. The figures showed new claims rose to 408,000 -- a gain of 9,000 from the previous week.
By late on Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in October stood at $108.51 a barrel, after $108.48 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for September dropped to $83.04 a barrel from $86.63 the previous week.
BASE METALS: Base or industrial metals sank markedly on the back of spreading fears of another vicious global downturn.
"We have reported a lot recently about clouds thickening on the economic horizon and a 'storm' being increasingly likely," Commerzbank analyst Carsten Fritsch said.
"The critical mass of bad news has clearly now been reached. (Thursday's) US data and especially the Philadelphia Fed Index plunging to its lowest level since November 2008, at minus 30.7, have even strengthened market fears of an imminent recession.
"At the same time, the prices of industrial commodities in particular are a long way from recession level, although their downside potential should not be underestimated."
By late Friday on the London Metal Exchange (LME), copper for delivery in three months sank to $8,837 a tonne from $8,886 the previous week.
Three-month aluminium fell to $2,358 a tonne from $2,421.
Three-month lead dipped to $2,310.25 a tonne from $2,390.
Three-month tin decreased to $23,000 a tonne from $24,600.
Three-month zinc slid to $2,190.75 a tonne from $2,195.
Three-month nickel dropped to $21,339 a tonne from $21,690.
COCOA: The cocoa market gained ground as traders eyed weather worries in leading producer Ivory Coast.
"Cocoa prices have firmed ... buoyed by weather concerns in the Ivory Coast," said Barclays Capital analyst Sudakshina Unnikrishnan.
By Friday on LIFFE, London's futures exchange, cocoa for delivery in December advanced to £1,892 a tonne from £1,849 the previous week.
In New York on the NYBOT-ICE, cocoa for December increased to $2,998 a tonne from $2,870.
SUGAR: Prices hit one-month highs, partly on hopes of rising demand from Asian powerhouse China.
"The price of sugar profited ... from the prospect of stronger demand from China, where state sugar reserves have already been auctioned off in a move to dampen the rise of domestic prices," Commerzbank analyst Fritsch said.
"Consequently, China's import requirements are likely to be higher than previously assumed."
By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in October advanced to 28.91 US cents a pound from 27.63 cents the previous week.
On LIFFE, the price of a tonne of white sugar for October rose to £764 compared with £733.60 the previous week.
COFFEE: Coffee futures also hit one-month peaks on the back of stretched global supplies, before trimming gains slightly.
By Friday on NYBOT-ICE, Arabica for delivery in December stood at 267 US cents a pound, up from 240.75 US cents the previous week.
On LIFFE, Robusta for November changed hands at $2,321 a tonne after $2,253 a tonne.
RUBBER: Rubber prices declined for the third straight week due to easing in demand and concerns of a global economic downturn.
The Malaysian Rubber Board's benchmark SMR20 fell to 450.65 US cents a kilo from 458.60 US cents the previous week.
© 2011 AFP