Commodities were definitely weaker than shares last week, and the US dollar’s strength (and no real change in key US interest rates on Friday) left the week looking underwhelming, and the outlook for the coming week decidedly mixed.
The reasonably solid end (and record closes) for equities failed to lift commodities which continue to be buffeted by fears about the Fed’s tapering, the value of the US dollar, disinflation in key economies, weak demand and oversupply.
Commodities remain a sector in need of help from a major outside factor – but it won’t be getting it from the Fed which is the biggest influence at the moment, especially on gold.
Comex gold futures in New York closed with a slight gain on Saturday morning, our time, but suffered their largest weekly loss in 10 weeks on the back of increased the timing of the end of for Federal Reserve’s $US85 billion a month stimulus program.
Gold for December delivery rose 50c to settle at $US1,244.10 an ounce on Comex, while the February 2014 contract, which was also among the most actively traded, ended at $US1,244.60 an ounce, up 30c. December gold ended slightly weaker at $US1243 an ounce.
Futures prices ended the week down 3.4%, the biggest weekly loss since September 13 when they shed 5.6%.
And the weakness didn’t stay with gold – its stablemate, silver lost 7 USc on Comex to end at $US19.86 an ounce for the December contract, while March silver fell 7c to $US19.90.
Silver lost a nasty 4.2% for the week.
Not helping gold sentiment is the start of the end of year price forecasts, with Goldman Sachs gloomy and talking about possible price falls of 15%.
New York chartists reckon gold could fall to around $US1,220 an ounce this week, especially with light volumes and the Thanksgiving holiday on Thursday, US time.
Semi precious metals were also mixed to weaker, while copper, the key industrial metal, rose 2 USc on Friday to end at $US3.214 a pound for December metal, a gain of 0.7%.
A new worry emerged on Friday, with media reports saying that the London banks that run the gold market are looking to arrange a new pricing system to make sure there are no concerns given the scandals in foreign exchange and interest rate setting and trading in London in the past year.
The Financial Times reported that the group of banks is planning "to tighten procedures to protect against manipulation" of the gold price in the wake of the interest rate setting scandal (called the Libor scandal).
The London Bullion Market Association has hired lawyers to check that the benchmarks it publishes for the spot and future gold prices as well as derivatives conform with global market standards.
The FT points out that London is the biggest gold market in the world with 175 million ounces (worth $US220 billion) traded each day in over the counter trade. Much of that is hedging and not actual purchases.
But it makes you wonder if the banks have checked already to make sure that there hasn’t been a repeat of the price fixing scandals seen in interest rates and now in foreign exchange (which seem to have started with the London offices of some banks in the gold association, such as Barclays and JP Morgan Chase).
Meanwhile, oil prices had their first rise in seven weeks last week.
For the week, US futures prices rose 1.1%, the week before prices lost 0.8%.
In London ICE Brent crude oil for January delivery finished up 97c at $US111.05 a barrel as labor unrest in Libya keeps crude oil output to around a third of typical levels of 1.6 million barrels a day, and news spread about further falls in exports from Iran (now at 24 year lows according to some reports).
Nymex futures in New York saw WTI crude fall on Friday by 0.6% to settle at $US94.84 a barrel. That was after the 1.7% jump on Thursday which left US oil at a near month high. Prices eased a fraction in after hours trading.
And there was a breakthrough in the latest round of talks between Iran and major world powers led by the US and France about a deal that could see its nuclear program wound back and higher exports of crude.
It’s only for six months and a more permanent arrangement will have to be agreed to, but it is likely to see oil prices come under pressure today.
A 45% slide in oil exports in October looks to have forced Iran to the negotiating table and held it there, despite the failure of talks earlier this month to reach a deal.
Media reports said strong supporters of Iran led by China, India and South Korea, had cut their imports in response to pressure from the US and other countries to tighten sanctions.
