Gold and silver continue to decline on dollar strength

gold bars

LONDON : Commodity prices dropped this week as the dollar strengthened, with Brent oil sinking to its lowest level in more than two years against a backdrop of solid supplies and sluggish demand.

Sugar futures meanwhile touched multi-year lows, weighed down by expectations of a large surplus of supplies.

OIL : Brent oil prices dived to $96.72 on Thursday — touching a low point last seen in 2012 — while WTI hit a 16-month trough at $90.43.

Prices plumbed the latest depths after the International Energy Agency (IEA), which advises on energy policy to industrialized nations, cut its oil demand outlook citing weaker economic growth in Europe and China.

The news followed broadly similar demand forecast downgrades this week from both the US government’s Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC).

The market hit a series of multi-month lows this week on the back of abundant global crude supplies and gloomy demand growth forecasts.

“Oil prices were lower again on ample supply and soft global demand,” said CMC Markets analyst Jasper Lawler.

The Paris-based IEA trimmed its estimate for oil demand this year to growth of 1.0 percent, or 900,000 barrels per day (bpd), from a previous estimate of 1.1 percent or 1.0 million bpd. That takes total demand for the year to 92.6 million bpd.

“Oil demand growth (is) slowing at a ‘remarkable’ pace, the IEA has said in its monthly report today,” said Ole Hansen, head of commodity strategy at Saxo Bank.

“This the final of monthly reports from the big three… (on the) same theme as what has been said by the EIA and OPEC this week.”

Falling oil prices have sparked market speculation that crude producer group OPEC could call an emergency meeting to halt the slide, a prospect dismissed by organization member Kuwait.

By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in October had fallen to $97.08 a barrel from $101.29 one week earlier.

On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for October slid to $92.65 per barrel compared with $94.05.

PRECIOUS METALS : Gold dropped to an eight-month trough at $1,228.13 an ounce on Friday as traders took their cue from the strong dollar.

That also dragged sister metal silver to $18.46, a level last seen in June 2013.

“Gold and silver were seeing continuing declines on recent US dollar strength,” noted Lawler at CMC Markets.

A stronger greenback makes dollar-priced gold and commodities more expensive for buyers using weaker currencies. That tends to dent demand and push prices lower.

By Friday on the London Bullion Market, the price of gold had slipped to $1,231.50 per ounce from $1,266 a week earlier.

Silver decreased to $18.64 an ounce from $19.13.

On the London Platinum and Palladium Market, platinum reversed to $1,360 per ounce from $1,406.

Palladium dipped to $829 an ounce from $887.

BASE METALS : Base or industrial metal prices fell across the board, as many traders cashed in recent gains.

“Industrial metals were down more than three percent, almost removing the gains that had built up during the previous four weeks,” said Hansen.

“Nickel and zinc, which up until this week had been two of the strongest performers, ran into profit-taking.

“Nickel in particular came under some selling pressure after speculation of a new threat of supply disruptions from the Philippines failed to materialize.”

By Friday on the London Metal Exchange, copper for delivery in three months had fallen to $6,835.75 a tonne from $6,932.75 a week earlier.

Three-month aluminum reversed to $2,050.50 per tonne from $2,098.

Three-month lead dipped to $2,122 a ton from $2,209.25.

Three-month tin dropped to $21,220 a ton from $21,390.

Three-month nickel decreased to $18,490 per ton from $19,460.

Three-month zinc fell to $2,281 a ton from $2,395.

SUGAR : The market collapsed to four-year lows in New York and five-year troughs in London, pulled sharply lower by an abundance of supplies, dealers said.

“The sugar price appears to know only one direction: downwards, for global sugar supply is likely to remain plentiful despite the expected shortfalls in Brazil,” said Commerzbank analysts.

“The International Sugar Organization envisages the fifth surplus running in 2014/15, though this is not something upon which all observers agree.”

London prices fell on Friday to $394 — a low last seen in April 2009. And in New York, prices hit a June 2010 trough of 14.25 US cents.

By Friday on LIFFE, London’s futures exchange, the price of a tonne of white sugar for delivery in October had fallen to $395.60 from $415.80 a week earlier.

On ICE Futures US exchange, the price of unrefined sugar for October dipped to 14.33 US cents a pound from 15.06 US cents a week earlier.


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