Gold hits record high in 'perfect storm' for precious metals

25th March 2011, Comments 0 comments

Gold smashed records this week and silver hit 31-year highs as the safe-haven metals were boosted by a "perfect storm" of fears over Middle East unrest, Portugal's debt and the Japan nuclear crisis.

The pair won further support as the dollar fell against the euro following weak manufacturing data in the United States before the currency firmed at the close on strong US growth figures.

"Safe haven buyers and a persistently weak US dollar continues to push precious metals to new highs," said Spread Co analyst Ian O'Sullivan.

"We are seeing almost a 'perfect storm' for metals prices as ongoing chaos in the Middle East, the earthquake/nuclear disaster in Japan and continuing worries over the European economy with Portugal and Ireland's problems.

"These, along with the continuing weakness of the dollar are driving investors to these 'safe haven' assets."

On Friday, data showed that US economic growth was much faster than first thought in the final months of 2010, as the Commerce Department revised the figure upward to 3.1 percent from the previous estimate of 2.8 percent.

PRECIOUS METALS: Gold hit a record $1,447.82 an ounce Thursday on the London Bullion Market and silver jumped to $38.16 an ounce -- its highest level since February 1980.

"Gold and silver are justifying their reputation as safe havens, which is hardly surprising in the current climate," said Commerzbank analyst Carsten Fritsch.

"In addition to the war in Libya, the unrest in the Arab region and the disaster in Japan, the debt crisis in eurozone periphery countries has also returned with a vengeance to the centre of market interest."

Portugal's five opposition parties Wednesday voted against the Socialist government's fourth cost-cutting plan aimed at avoiding a multi-billion euro financial bailout like those given to Greece and Ireland.

Prime minister Jose Socrates, who headed a minority government, immediately resigned.

"This parliament's decision signals to the market that Portugal's saving efforts are diminishing," added Fritsch. "Furthermore, it seems almost unavoidable that Portugal will have to tap into the EU rescue fund."

A weaker dollar boosts dollar-priced commodities because they become cheaper for buyers using rival currencies. That in turn stimulates demand and eventually prices.

By late Friday on the London Bullion Market, gold rose to $1,436 an ounce from $1,420 a week earlier.

Silver increased to $37.68 an ounce from $35.15.

On the London Platinum and Palladium Market, platinum advanced to $1,752 an ounce from $1,720.

Palladium climbed $754 an ounce from $727.

OIL: World oil prices rallied in a week dominated by unrest in Libya and the Middle East.

Traders also digested US growth data, which is significant for energy markets as the United States is the world's biggest oil-consuming nation.

"The main focus (for traders) remains on the ongoing political unrest in Libya, Yemen and Syria," said Myrto Sokou, an analyst at Sucden brokers.

"It was certainly a very volatile and unpredictable week with fairly nervous trading conditions across the commodities and equity markets."

Oil traders have been making deals in recent days against a backdrop of anti-government protests that have spread across the Middle East and North Africa, with uprisings in Yemen, Syria and Bahrain after similar movements led to the recent ouster of leaders in Egypt and Tunisia.

In Libya, NATO late Thursday agreed to enforce a no-fly zone to stop Moamer Kadhafi's jets from attacking rebels while US, British and French planes continued to target his government's military infrastructure.

Oil-rich Libya was producing 1.69 million barrels a day before the unrest but this has since ground to a halt.

Meanwhile, the US government announced on Wednesday that US gasoline (petrol) stockpiles dived by 5.3 million barrels last week.

The market is closely following the level of gasoline reserves ahead of the summer driving season in the United States starting in May, when many Americans hit the roads on holiday, pushing up fuel demand.

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in May climbed to $115.10 a barrel from $113.29 one week earlier.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for May, increased to $105.71 compared with $100.22 for the April contract a week earlier.

BASE METALS: Industrial metals rose as traders went bargain hunting after recent losses that were sparked by demand fears in the wake of Japan's devastating earthquake and tsunami on March 11.

"With (...) equities strong and the dollar generally weak, it may be that the dip following the earthquake has just been taken as another buying opportunity," said FastMarkets analyst William Adams.

Japan is the world's second biggest consumer of nickel and third largest of tin.

By late Friday on the London Metal Exchange (LME), copper for delivery in three months rose to $9,771 a tonne from $9,550.50 a week earlier.

Three-month aluminium increased to $2,642 a tonne from $2,555.

Three-month lead climbed to $2,673.75 a tonne from $2,679.

Three-month tin rose to $31,800 a tonne from $29,550.

Three-month zinc was up to $2,380.50 a tonne from $2,324.

Three-month nickel was higher at $27,050 a tonne from $26,750.

SUGAR: Sugar futures rebounded from two weeks of falls.

By Friday on the New York Board of Trade (NYBOT), the price of unrefined sugar for delivery in May rose to 27.88 US cents a pound from 27.43 cents a week earlier.

On LIFFE, London's futures exchange, the price of a tonne of white sugar for May increased to £711.60 from £707.60.

COCOA: Prices advanced once again as traders nervously eyed unrest in leading cocoa producer Ivory Coast.

Violence has escalated in Abidjan in the once booming west African country where at least 462 have been killed since a disputed election, according to the United Nations.

"Cote d'Ivoire (Ivory Coast) is of course a matter of concern," said Jean-Marc Anga, executive director of the International Cocoa Organisation (ICCO), a London-based industry body.

"We have come to a situation in which cocoa purchases have been seriously hampered.

"As we know, Cote d'Ivoire represents around 35 percent of the world supply. If, during a number of months, we have no cocoa coming out from Cote d'Ivoire, eventually it will seriously impact the market.

"According to data in October, stocks represent four or five months of supply, so it's only a matter of time before the situation becomes critical."

By Friday on LIFFE, cocoa for May increased to £2,111 a tonne from £2,049 a week earlier.

On NYBOT, cocoa for delivery in May rose to $3,260 a tonne from $3,206.

GRAINS AND SOYA: Prices mostly edged higher in buoyant trade.

"Grains prices posted a strong rebound on robust US export sales, dry weather in the US Plains and concerns over the potential of delayed spring planting in the US," said Barclays Capital analysts in a note.

By Friday on the Chicago Board of Trade, May-dated soyabean meal -- used in animal feed -- eased to $13.60 a bushel from $13.62 a week earlier.

Maize for delivery in May gained to $7.07 a bushel from $6.85.

Wheat for May climbed to $7.43 from $7.23.

COFFEE: The market declined on profit-taking, one week after striking three-year highs at $2,672 a tonne in London on the back of stretched supplies.

By Friday on LIFFE, Robusta for delivery in May eased to $2,609 a tonne from $2,612 a week earlier.

On NYBOT, Arabica for delivery in May dipped to 268.75 US cents a pound from 275.95 cents.

RUBBER: Malaysian rubber prices rose in line with a stronger showing in the Tokyo Commodity Exchange (TOCOM).

The Malaysian Rubber Board's benchmark SMR20 rallied to 510.85 US cents per kilo from 447.25 cents last week.


© 2011 AFP

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