Another five weak days for commodities last week, so will the hint of more spending by the European Central Bank and the 6th rate cut by China’s central bank reverse that trend today and for the rest of the week?
That didn’t help in trading on Friday night with commodities weaker as the US dollar rose against the euro and investors took the message that the ECB and China were responding to weak demand, not growth.
Gold, copper, oil, silver and iron ore all fell, along with lesser commodities. The recent rebound in commodity prices certainly ended last week and the moves by the ECB and the central bank of China sent powerful negative messages to the markets.
For Australian investors, there’s a big heads up warning from another fall in the price of iron ore – despite the expected solid gain in the sharemarket today after the strong rise in the futures market on Friday night and Saturday morning.
Ore with 62% iron content delivered to Qingdao in northern China fell 1.1% on Friday to $US51.62 a dry tonne. It was the 5th daily fall in a row and the price is now at its lowest level in three months (since July 24), according to the Metal Bulletin.
Spot iron ore prices fell 4% last week and have not dropped for five of the past six weeks. Iron ore prices hit a low of $US44.59 on July 8.
In New York, Comex gold futures fell to their lowest settlement level in two weeks on Friday, thanks to the rise in the US dollar after the ECB’s hint about expanding its spending in December.
Friday’s fall of 0.3% pushed gold futures to their largest weekly loss since August.
Comex December gold fell $US3.30 to settle at $US1,162.80 an ounce in New York, which was the lowest settlement since October 9.
For the week it lost 1.7%, which was the largest weekly drop since the last week of August.
Comex December silver lost a cent to $US15.827 an ounce, for a loss of around 1.8% over the week.
Comex December copper lost 3.4 cents on Friday, or 1.4%, to $US2.35 a pound, down about 2.2% lower for the week, and despite another production cut by global major Freeport.
US oil futures settled at their lowest level in almost a month in New York, but natural gas saw its lowest settlement price for three years – since 2012.
Oil was hit by the stronger value of the greenback and a rise in US stocks and no change in production last week – and just one fewer oil rig drilling across the US last week.
December crude settled at $US44.60 a barrel on the New York Mercantile Exchange, down 78 cents, or 1.7%, on the day.
That was the lowest settlement since September 28 and a weekly drop of 5.6%.
US November natural gas settled at $2.286 per million British thermal units, down 4.2% for the day to lose over 6% for the week.
The settlement was the lowest since mid-June 2012.
Supplies are growing, the US autumn is mild, especially in the northeast and midwest, so demand for gas has not grown as was forecast.
That’s bad news for companies like BHP Billiton which are still trying to keep their gas businesses operating, even though they have cut spending and drilling. It is also bad news for the embattled US coal industry – as the quarterly report this week from Peabody Energy will show.
In London December Brent crude futures eased lost 9 cents, or 0.2%, to end at $US47.99 a barrel – down around 4.8% lower on the week.
Oil and other commodities will continue to drift lower while the greenback rises against the weaker euro, thanks to the big hints at more easing from the ECB six weeks ago.
They might get some temporary relief from the expected Fed decision this week to sit on US interest rates.
