Gold hits record high as recession fears bite

9th September 2011, Comments 0 comments

Gold prices hit fresh record highs this week during a roller-coaster week for commodities, as investors tracked growing expectations that the global economy was heading towards fresh recession.

Prices took a knock on Friday along with stock markets, in part owing to scepticism over a plan to boost jobs in the United States, traders said.

"Macroeconomic data and associated sentiment held sway over the trajectory of commodity prices this week and sensitivity to the macro picture remains acute," said Barclays Capital analyst Sudakshina Unnikrishnan.

The eurozone debt crisis threatens to create pockets of recession and a great degree of uncertainty, a gloomy OECD report said on Thursday.

PRECIOUS METALS: Gold, seen as a safe bet in times of economic uncertainty, jumped on Tuesday to a record high price of $1,921.15 an ounce on the London Bullion Market but fell over the week as profit-taking set in.

The precious metal's status as a safe haven was meanwhile set to strengthen after Switzerland this week shocked markets by weakening its currency.

The Swiss National Bank on Tuesday placed a floor on the euro's value against a surging Swiss franc, which like gold is seen as a traditional safe bet among investors.

"This surprise move from the SNB is gold beneficial in the long run," said Andrey Kryuchenkov, a commodities analyst at Russian financial group VTB Capital.

"And, assuming that risk aversion escalates from here, bullion is still your investor darling."

The SNB set a minimum exchange rate of 1.20 francs per euro, saying the current value of the Swiss currency was a threat to the economy.

The Swiss franc has risen strongly in response to the eurozone debt crisis, hitting Swiss exporters and the tourism industry hard.

Gold meanwhile has set a series of record highs over the past few months.

"Longer-term, this SNB decision should strengthen gold's claim as a safe-haven asset and will likely be much in demand for wealth preservation," said Credit Agricole analyst Robin Bhar. Gold is also a good hedge against inflation.

By late Friday on the London Bullion Market, gold fell to $1,851 an ounce from $1,875.25 the previous week.

Silver dipped to $41.40 an ounce from $42.06.

On the London Platinum and Palladium Market, platinum retreated to $1,842 an ounce from $1,873.

Palladium decreased to $748 an ounce from $785.

OIL: Crude futures retreated as the dollar rose against the euro and as traders gave a lukewarm response to President Barack Obama's plan to fuel jobs growth in the United States -- the world's biggest oil consumer.

The European single currency dropped under $1.37 on Friday for the first time since February as concerns grow over the eurozone debt crisis.

A stronger greenback makes dollar-denominated commodities like oil more expensive for buyers holding rival currencies, denting demand for the raw materials and pushing down prices.

Across the Atlantic, Obama on Thursday proposed a $447 billion plan to revive the US economy, which includes cutting payroll taxes for employees and businesses, spending billions fixing roads and bridges and extending and revamping unemployment benefits.

Oil prices closed lower on Thursday ahead of Obama's jobs speech and despite data showing a drop in US crude inventories of four million barrels last week.

The drawdown was not caused by strong demand from US consumers, analysts said, attributing it instead to a temporary disruption of oil production in the Gulf of Mexico caused by Tropical Storm Lee.

"We had an oil inventories report showing crude oil supply in the US actually falling more than expected, and that has provided some support to prevent oil from falling further," said Victor Shum, an analyst at Purvin and Gertz energy consultancy in Singapore.

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in October slipped to $112.19 a barrel from $113.23 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for October, fell to $86.66 a barrel from $87.06 a week earlier.

BASE METALS: Base metals were mixed as traders reacted to macro-economic developments.

"Metals were under pressure as the stronger dollar and lingering concern about the European debt situation continued to weigh on the markets," said MF Global analyst Edward Meir.

"Threats of (mining) strikes kept the losses in copper somewhat in check, but could not dispel the selling entirely," he added.

By late Friday on the London Metal Exchange (LME), copper for delivery in three months dipped to $8,883 a tonne from $9,025 the previous week.

Three-month aluminium decreased to $2,375 a tonne from $2,427.

Three-month lead declined to $2,443 a tonne from $2,478.

Three-month tin increased to $23,900 a tonne from $23,870.

Three-month zinc grew to $2,196 a tonne from $2,182.

Three-month nickel advanced to $21,450 a tonne from $21,348.

COCOA: Prices headed south owing to high supplies of the commodity used to make chocolate.

"Ideal growing conditions have seen strong production from key West African producer states, with a robust crop emerging not just in the Ivory Coast but in neighbouring Ghana as well," said Barclays Capital analyst Sudakshina Unnikrishnan.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in December fell to £1,862 a tonne from £1,955 the previous week.

In New York on the NYBOT-ICE, cocoa for December dropped to $2,905 a tonne from $3,094.

SUGAR: Sugar rebounded despite the prospect of high supplies.

"We reiterate our bullish view on sugar in 2011/12 despite the possibility of a surplus in the market," said Standard Chartered analyst Abah Ofon.

"We argue that the surplus (output less consumption) will do little to boost global end-of-season stocks, which have not recovered since the drawdown that followed two consecutive seasons of poor harvests in India," he added.

By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in October gained to 29.19 US cents a pound from 28.95 cents the previous week.

On LIFFE, the price of a tonne of white sugar for October grew to £767 from £752.30 the previous week.

COFFEE: Coffee prices retreated in New York on profit-taking, a week after reaching the highest level since May on stretched global supplies.

By Friday on NYBOT-ICE, Arabica for delivery in December fell to 279 US cents a pound from 288 US cents the previous week.

On LIFFE, Robusta for November declined to $2,179 a tonne after $2,274 a tonne.

© 2011 AFP

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