LONDON - Commodity prices diverged this week as traders tracked concerns over US economic growth, which boosted gold futures, and drought conditions in Brazil that again lifted coffee and sugar.
The US economy grew more slowly late last year than previously thought, but there was enough vigour that the Federal Reserve will likely continue reducing its stimulus programme, analysts said.
The Commerce Department on Friday cut its estimate of gross domestic product (GDP) growth in the final quarter to an annual rate of 2.4 per cent, from an initial reading of 3.2 per cent.
On Thursday, the new chair of the Federal Reserve, Janet Yellen, suggested the US central bank could shift its tapering policy if recent weaker data represented a fundamental change in growth.
- Crude oil prices mixed -
OIL: Crude futures steadied after sharp gains the previous week, as traders weighed up higher demand in the United States against concerns over the outlook for growth in the world’s biggest economy.
Oil prices began the week higher, finding support from political turmoil in Ukraine and some oil-producing countries as well as from the return of cold weather in large parts of the United States.
They additionally won mid-week support from official data showing that US commercial crude oil supplies rose by only 100,000 barrels last week, one-eighth of the amount expected by analysts.
Prices headed south as the trading week closed out, owing to concerns over soft US economic data.
In the US, the world’s biggest consumer of crude, data on Thursday showed first-time claims for unemployment insurance benefits, a sign of the pace of layoffs, rose last week, well above analysts’ average estimate. New orders for manufactured durable goods also slipped 1.0 per cent in January, extending December’s 5.3 per cent tumble, the US Commerce Department said. Yellen told the Senate Banking Committee that policymakers thought severe weather across much of the country was to blame for a disappointing run of economic data over the past two months, including on jobs, industrial output and consumption.
However, she said they would be keeping a close eye on the economy to see if the weak figures continue, which could lead to a slower pace of cuts to the stimulus programme.
French bank Credit Agricole said in a note to investors that Yellen’s comments “gave hope that the poor run of US data will come to end soon, once the weather impact reverses”. Investors are also watching events in Ukraine, a major energy consumer where the ousted pro-Moscow president, Viktor Yanukovych, emerged defiant Thursday after five days in hiding. Credit Agricole said the situation in the ex-Soviet state’s Crimean peninsula, where pro-Russian gunmen seized government buildings, “resembles the type of stand-off taking place during the Cold War and markets may be underestimating the potential impact”. New York crude futures had the previous week leapt to a four-month pinnacle on the back of US winter weather and more turmoil in oil exporters Nigeria, South Sudan and Venezuela.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in April fell to $108.99 a barrel compared with $109.64 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for April gained to $102.59 a barrel from $102.05.
- Gold extends recovery -
PRECIOUS METALS: Gold rose further, reaching a four-month high at $1,345.35 an ounce.
Sister metal silver also managed a four-month peak at $22.17 an ounce before profit-taking caused it to fall over the week. “Since the beginning of the year, gold has now risen by almost 12 per cent,” said Commerzbank in a note to clients.
Jasper Lawler, an analyst at traders CMC Markets added: “The move in gold and silver can largely be explained as a safe-haven move out of emerging market economies which as high-risk investments have been some of the first to suffer since the announcement of the US Federal Reserve’s tapering of asset purchases.”
By late Friday on the London Bullion Market, the price of gold grew to $1,326.50 an ounce from $1,323.25 a week earlier.
Silver slipped to $21.27 an ounce from $21.74.
On the London Platinum and Palladium Market, platinum increased to $1,447 an ounce from $1,422.50.
Palladium edged up to $743 an ounce from $739.
BASE METALS: Copper futures dropped under $7,000 a tonne for the first time in three months on China growth concerns.
“Once again, metal markets have come under pressure amid fears about China’s growth,” Commerzbank said.
“There is a strong correlation between the Chinese equities market and base metal prices because China plays a dominant role as the largest consumer of all metals.
“What is more, China’s construction sector is the key consumer of many metals, which is why concerns about a slowing of construction activity have a pronounced negative impact,” it added.
On the upside, tin struck near five-month peaks after Indonesia — the world’s largest exporter of the commodity — introduced a minimum price for trading in the widely-used metal.
By Friday on the London Metal Exchange, copper for delivery in three months fell to $7,009 a tonne from $7,148 week earlier. Three-month aluminium dropped to $1,762 a tonne from $1,780.25.
Three-month lead dipped to $2,134 a tonne from $2,149.
Three-month tin increased to $23,499 a tonne from $23,045.
Three-month nickel gained to $14,550 a tonne from $14,430.
Three-month zinc grew to $2,064.75 a tonne from $2,058.75.
- Coffee, sugar rally -
COFFEE: Prices rallied further to reach the highest points for a number of months on drought conditions in Brazil.
Arabica-quality coffee, which has surged close to 60 per cent in value since the start of the year, reached 181.25 US cents a pound on Tuesday, the highest level since October 2012. Robusta hit a nine-month peak at $2,045 a tonne on Monday.
“An unprecedented weather situation in the Brazilian coffee growing area has led to an unprecedented rally in New York Arabica futures,” said Kona Hague, analyst at Macquarie financial group. “Rains are finally returning to the coffee areas, meaning further losses should be stemmed, but the forecast precipitation is still on the dry side and may not be enough to reverse the damage already caused by the drought,” she added. By Friday on ICE Futures US, Arabica for delivery in May advanced to 179.25 US cents a pound from 172.20 cents a week earlier.
On LIFFE, Robusta for May jumped to $2,038 a tonne from $1,972.
SUGAR: Prices hit the highest levels for nearly four months also on the back of drought conditions in Brazil.
Amid current conditions, Commerzbank said it was forecasting a supply deficit in the 2014/15 crop year.
By Friday on LIFFE, the price of a tonne of white sugar for delivery in May increased to $476.30 from $462.10 a week earlier.
On ICE Futures US, the price of unrefined sugar for delivery in May gained to 17.74 US cents a pound from 16.85 US cents.
COCOA: Prices retreated after a recent rally to 2.5 year highs caused by a tight supply situation. “Global supply already failed to cover global demand in the past 2012/13 season,” noted analysts at Commerzbank.
“For the 2013/14 crop year, another market deficit of 100 thousand tonnes is expected, mainly on the back of solid demand.”
By Friday on LIFFE, London’s futures exchange, cocoa for delivery in May dipped to £1,838 a tonne from £1,843 a week earlier. On the ICE Futures US exchange, cocoa for May eased to $2,969 a tonne from $2,973
RUBBER: Prices dropped further on a lack of demand from major consumers China and India that came amid high stockpiles of rubber.
The Malaysian Rubber Board’s benchmark SMR20 fell to 188.70 US cents a kilo from 191.25 cents the previous week.