Gold hits fresh record as eurozone debt crisis deepens

15th July 2011, Comments 0 comments

Gold was the stand-out performer on commodity markets this week, striking a record high close to $1,595 as investors sought its traditional safety amid an escalating eurozone debt crisis.

Fears of a debt default in Greece and perhaps other struggling eurozone members were compounded by growing concern that politicians in Washington are unable to hammer out a deal to allow a rise in the government's borrowing limit.

The eurozone debt crisis, which has already dragged down Ireland, Greece and Portugal, spread this week to Italy and Spain, whose stretched public finances sent their borrowing costs sharply higher, turning the screw on governments scrambling to hold the line.

PRECIOUS METALS: Gold rocketed to a record high of $1,594.45 an ounce on Thursday, topping the $1,577.57 that was set on May 1.

"Gold hit a new all-time high as investors continue to fret over the European sovereign debt situation," said analyst Ian O'Sullivan at trading firm Spread Co.

"With Italy, Spain, Ireland and Portugal worries intensifying and now the (US Federal Reserve) ... suggesting some members were thinking about the need for additional easing, investors have just hit the panic buy buttons this week.

"We think that gold may top out here for a while and pull back to $1,520-1,540 before an assault on the $1,600 level," he added.

EU governments are scrambling to fight debt contagion threatening Italy and Spain amid mounting sentiment that Greece could default on its debt despite a massive EU-IMF rescue for Athens.

"The heightening of sovereign debt uncertainty in Europe has provided a boost to gold prices despite the seasonal weakness in demand," Barclays Capital analyst Suki Cooper said.

Gold also won found support after US Federal Reserve chairman Ben Bernanke said Wednesday that the US central bank was prepared to renew its stimulus efforts if the American economy remains feeble.

By late Friday on the London Bullion Market, gold jumped to $1,587 an ounce from $1,541.50 the previous week.

Silver rallied to $38.17 an ounce from $36.28.

On the London Platinum and Palladium Market, platinum advanced to $1,760 an ounce from $1,740.

Palladium increased to $777 an ounce from $750.

OIL: World oil prices were steady as concerns over tight supplies helped offset fears the worsening eurozone crisis will dampen economic growth and signs of slower expansion in the United States and China, the two biggest energy consumers.

"Oil prices remain at the mercy of macroeconomic histrionics, a feature we expect to persist" over the coming weeks, said Barclays Capital analyst Amrita Sen.

"If the macroeconomic pessimism ratchets higher, oil prices could take another lurch down, especially if the shape and strength of the global recovery is once again put into question.

"In terms of oil demand itself, while the cyclical rebound is drawing to a close, underlying demand indications are far from worrisome with emerging market growth still robust," Sen added.

Traders are speculating that energy demand could be hit in the European countries battered by the debt crisis, although this should be partly offset by tight supplies.

The International Energy Agency on Wednesday warned that the oil market needed more supplies for the third quarter of 2011, despite increased OPEC production and its own emergency stock release last month.

On June 23, the IEA authorised an emergency drawdown of its member nations' strategic oil stockpiles to replace lost output from Libya and to give the global economy relief from soaring energy prices.

The Organization of Petroleum Exporting Countries (OPEC), whose members include Saudi Arabia, Venezuela and Angola, pumps about 40 percent of the world's oil supplies.

By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in September stood at $117.25 a barrel, which compared with $117.60 a week earlier for the August contract.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for August rose to $97.29 a barrel from $96.27 the previous week.

BASE METALS: Base or industrial metals enjoyed mixed fortunes as traders digested growth data from China, the world's second biggest economy and a major consumer of raw materials.

"Price movements were mixed," said Barclays Capital analyst Nicholas Snowdon.

"Broad market sentiment received some support from a stronger-than-expected second quarter China growth figure, as well as indications from Fed Chairman Bernanke of the potential for additional (economic) policy support, although this was tempered by the on-going challenges presented by the peripheral Europe debt crisis."

China's economy grew 9.5 percent year-on-year in the April-June period. That was slightly higher than market expectations but slower than 9.7 percent in the first three months 2011.

By late Friday on the London Metal Exchange (LME), copper for delivery in three months rose to $9,707 a tonne from $9,659 the previous week.

Three-month aluminium fell to $2,486 a tonne from $2,534.

Three-month lead edged up to $2,693 a tonne from $2,692.

Three-month tin rallied to $27,250 a tonne from $26,902.

Three-month zinc dipped to $2,368 a tonne from $2,380.

Three-month nickel climbed to $24,335 a tonne from $23,596.

COCOA: Prices dropped on investor caution and news of a large crop in Ivory Coast, the world's biggest cocoa producer.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in September fell to £1,972 a tonne from £2,035 the previous week.

In New York on the NYBOT-ICE, cocoa for September decreased to $3,142 a tonne from $3,195.

COFFEE: Prices slid with Brazil expected to produce a record harvest.

By Friday on NYBOT-ICE, Arabica for September dropped to 256 US cents a pound from 269.10 cents the previous week.

On LIFFE, Robusta for delivery in September retreated to $2,300 a tonne from $2,463.

SUGAR: Sugar hit a 20-year high in London, at £890.10 a tonne, as Brazil's was forecast to have an exceptionally poor harvest.

"For the first time in ten years, Brazil's sugar cane harvest would be lower than the previous year," Commerzbank analysts said in a note.

By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in October slipped to 28.95 US cents a pound from 29.27 cents the previous week.

On LIFFE, the price of a tonne of white sugar for August gained to £844 from £744.60.

GRAINS AND SOYA: Prices rose across the board.

By Friday on the Chicago Board of Trade, maize for delivery in September increased to $7.09 a bushel from $6.42 a week earlier.

November-dated soyabean meal -- used in animal feed -- rallied to $13.98 a bushel from $13.46.

Wheat for September advanced to $7.09 from $6.51.

RUBBER: Malaysian rubber prices increased this week following positive sentiment on the Tokyo futures market.

The Malaysian Rubber Board's benchmark SMR20 increased to 455.80 US cents a kilo from 456.15 a cents a week earlier.

© 2011 AFP

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