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Commodity prices mostly fall on lack of stimulus measures

04 august 2012, 18:48
0
Photo courtesy of trak.in
Photo courtesy of trak.in
Global commodity markets mainly fell in subdued trade this week as investors expressed disappointment at the lack of central bank action to kick-start the struggling global economy, AFP reports.

"Commodity prices have broadly eased over the past week. Macro factors, in particular expectations about the (US) Fed and ECB policy actions, determined price direction," said Barclays Capital analyst Sudakshina Unnikrishnan.

European Central Bank president Mario Draghi announced no immediate action on the eurozone sovereign debt crisis on Thursday, despite insisting the previous week that he would "do whatever it takes to preserve the euro."

Markets also stumbled after the US Federal Reserve opted against more quantitative easing (QE) stimulus measures on Wednesday.

However, oil prices jumped Friday as data showed that the US economy created 163,000 jobs in July. Analysts had expected a gain of 100,000 jobs in the United States, which is a major consumer of many raw materials.

OIL: Prices staged a late rally as the positive US non-farm payrolls data signalled healthy demand in the world's biggest oil consuming nation.

"Crude oil prices rebounded ... with fairly dramatic gains (Friday) as a result of the the weaker dollar and more upbeat sentiment," CMC Markets analyst Brenda Kelly SAID.

A weaker US currency makes dollar-denominated oil more attractive to buyers using stronger currencies, tending to lift crude demand and prices.

Oil also FOUND support this week from geopolitical tensions surrounding key producer Iran.

US President Barack Obama on Tuesday imposed new economic sanctions on Iran's oil export sector and on a pair of Chinese and Iraqi banks accused of doing business with Tehran.

"Iranian sanctions helped build on recent increases in oil prices," noted Inenco analyst Tom Pering.

"Supply concerns have really taken the forefront of investors' minds as the effects of sanctions and geopolitical issues are beginning to take hold.

"Oil has returned to bullish territory and can be expected to trade in a range between $105-109 per barrel over the next week."

Obama said the new measures highlighted US determination to force Tehran "to meet its international obligations" in nuclear negotiations.

The goal of the US sanctions, which are mirrored by similar measures by the European Union and other major economies, is to force Iran to negotiate a deal to open up its nuclear programme to international supervision.

Tehran insists it has a right to enrich uranium for civilian nuclear energy and research but Western powers fear it is attempting to stockpile enough highly-enriched fuel to have a "break-out capability" to build a bomb.

Oil also rose following a sharper-than-expected drop in US crude stockpiles that sparked hopes for stronger demand.

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in September jumped to $108.58 from $105.94 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for September rallied to $91.02 from $89.90 a week earlier.

PRECIOUS METALS: Gold fell back, dragging other precious metals lower.

"Gold traders were clearly disappointed when the ECB president did not follow up with any concrete steps after pronouncing last week that he would do everything to save the euro," said Austin Kiddle, director at British-based gold brokerage Sharps Pixley.

He added that Draghi's comments last week had suggested that "the ECB would purchase government bonds along with the European rescue fund.

"In the next few weeks and months, gold prices will be affected by how well the ECB will carry out these measures and whether a closer (European) fiscal integration and a banking union can be fostered," Kiddle concluded.

By late Friday on the London Bullion Market, gold dropped to $1,602 an ounce from $1,618.25 a week earlier.

Silver declined to $27.25 an ounce from $27.73.

On the London Platinum and Palladium Market, platinum dropped to $1,390 an ounce from $1,410.

Palladium eased to $573 an ounce from $574 an ounce.

BASE METALS: Prices were hit by downbeat Chinese data, with nickel diving to $15,236 -- its lowest since mid-July 2009 -- and copper also witnessing heavy falls.

China's manufacturing activity weakened to an eight-month low in July when the purchasing managers' index (PMI) slipped to 50.1 last month from 50.2 in June, according to a statement released by the National Bureau of Statistics.

"Copper slid back dramatically ... as official factory PMI from China fell to an eight-month low of 50.1 (and) exacerbated investor growth concerns," said Kelly of CMC Markets.

By late Friday on the London Metal Exchange, copper for delivery in three months dipped to $7,384 a tonne from $7,537 a week earlier.

Three-month aluminium slipped to $1,854 a tonne from $1,888.

Three-month lead edged down to $1,875 a tonne from $1,900.

Three-month tin declined to $17,750 a tonne from $18,035.

Three-month nickel slid to $15,528 a tonne from $15,930.

Three-month zinc dropped to $1,827 a tonne from $1,840.

COFFEE: Coffee prices were lower on supply concerns.

By Friday on NYBOT-ICE, Arabica for delivery in September fell to 172.50 US cents a pound from 175.15 cents a week earlier.

On LIFFE, Robusta for September was down to $2,230 a tonne from $2,239.

COCOA: Prices rallied for the third week in a row on weather-linked supply concerns in western Africa.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in September climbed to £1,647 a tonne from £1,587 a week earlier.

In New York on the NYBOT-ICE, cocoa for September gained to $2,372 a tonne compared with $2,320.

SUGAR: Sugar lost ground.

By Friday on LIFFE, the price of a tonne of white sugar for delivery in October retreated at $607.80 compared with $609.07 a week earlier.

On NYBOT-ICE, the price of unrefined sugar for October dropped to 21.97 US cents a pound from 22.31 cents the previous week.

RUBBER: Prices fell.

By Friday, the Malaysian Rubber Board's benchmark SMR20 fell to 274.45 US cents a kilo from 282.90 cents the previous week.

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