The gloomy outlook for commodity prices will again be the major driver for many markets this week – starting with Australia today.
Gold, copper, oil, iron ore, other metals and some grains all took a battering last week and face more of the same this week.
This week’s meeting of the Fed could add to the pressures if the post meeting statement bolsters the value of the US dollar.
Last week saw Brent and US crude oil futures settle at their lowest since March and register their fourth straight weekly decline – down more than 4% and 5% respectively.
In fact US oil futures are off about 22% since their $61-a-barrel highs in June, meaning oil is now in a bear market.
Copper slumped to its lowest in six years, with three-month copper on the LME hitting $US 5,191.50 a tonne, its cheapest since July 2009, and down 6% on the week. US prices were off more than 4.5%.
Those falls saw the Bloomberg Commodity index lose 3.3% over the week, to its lowest level since 2009.
Adding to the gloom was the flash update on the health of China’s huge manufacturing sector – the Caixin/Markit flash survey fell sharply to a reading of 38.2, the lowest for 15 months and the fifth month in a row the index has been under the 50 level which divides expansion (above) from contraction (below).
The market focus this week will be on oil, gold and copper.
In the energy market, Brent September crude fell 65 cents to settle at $US54.62 a barrel in London, the lowest close since March 19, while US West Texas type crude for September delivery lost 31 cents to settle at $US48.14, its lowest settlement since March 31.
A surprise increase in the number of US drilling rigs added to the negative pressure around oil. The weekly Baker Hughes report revealed US oil companies added 19 rigs (21 in oil) to their rosters in oil and gas production and exploration.
Other commodities also retreated.
Gold dropped 1% to a fresh five-year low of $1,074 a troy ounce in New York, and was down more than $US8 an ounce in trading on Comex at around $US1.085, the lowest settlement since February 2010, according to US data.
But after-hours trading took that price back to $US1,099, a gain of $US4.20 on the day.
More and more analysts are tipping a fall towards $US1,000 an ounce, or even under that level in coming months.
What is worrying them is that not even conditions suited for gold – the tensions over Greece and the big sell-off in Chinese shares, plus instability in the Middle East, has been enough to arrest the slide in the price of gold (it pulls silver down with it).
Hence the gloomy outlook.
The accidental release of internal Fed staff economic forecasts showing a rate rise between now and the end of the year didn’t help sentiment, even though a rate rise from September onwards is widely expected.
Gold prices lost more than $US46-an-ounce flast week or around 2.3%. Comex September silver fell 21.3 cents, or 1.5% on Friday to $US14.488 an ounce, down around 2.3% for the week.
Comex September high-grade copper ended little changed at $US2.383 a pound on Friday, for a weekly loss of roughly 4.6%.
