Even though oil eased and gold, copper and other metals rose on Friday night, Australian investors will focus on the slide in the price of iron ore under $US40 a tonne on Friday night.
Thanks to the solid US jobs report, but more importantly the continuing strength of the euro, the US dollar edged high, but most commodity prices rose on the day and the week.
The Aussie dollar held its ground well above 73 US cents at the close early Saturday (73.39), a sign of just how weak the greenback had become since the European Central Bank meeting on Thursday helped the euro reverse course and rise sharply. But the greenback still lost 1.5% against a basket of major currencies.
But that all seems irrelevant to the iron ore and steel industries.
Iron ore prices for immediate delivery to Tianjin port in northeastern China lost 2.2% to $US39.40 a tonne, the lowest ever recorded by The Steel Index under the current pricing system (before 2009 prices were set by annual contract).
But Bloomberg reported that according to Goldman Sachs data, the price was the lowest for 10 years.
Bloomberg and other analysts said the price is falling because Chinese mills are operating at a loss and are selling surplus iron ore stocks to generate cash flow to keep their businesses going.
Steel prices are falling and the booming export market can’t soak up the surplus steel being turned out every month in China.
Iron ore prices fell 7% – 8% for the week, depending on the price source (Metal Bulletin or Steel Index).
That was the sharpest fall since a near 8% slide in early July.
So watch the prices of BHP Billiton, Fortescue and Rio Tinto later today – the local market should rise solidly at the start after Wall Street’s 2% surge on Friday night.
Will local investors again ignore the slide in iron ore prices, as they did a week ago?
New York gold futures staged a big turnaround on Friday night to rack up their first weekly gain in seven weeks off the back of the strong US jobs report for November.
Instead of rising, the US dollar eased on Friday for a second day as the euro continued to rise off the back of the European Central Bank move to loosen its already very relaxed monetary policy.
Comex Gold for February delivery jumped $US22.90, or 2.2%, to settle at $US1,084.10 an ounce, but off the session’s high of $1,088.30.
That was the largest percentage and dollar gain since August 20 and the settlement price was the highest in nearly a month.
The gold contract climbed about 2.6% last week, posting its first gain since the week ending October 16.
Comex March silver also rallied strong, following gold higher and jumping by 45.1 cents, or 3.2%, to end at $US14.528 an ounce. It was up 3.4% for the week.
US precious metals analysts say the price level at $US1,090 an ounce is a one to watch and regaining, and closing above that level could break the ‘bearish’ overtone to the gold market.
The big test though will come next week once we see what the Fed does next week – if as expected it lifts rates, the US dollar will edge higher and commodities will either ease, or move sideways into the New Year (the rate rise has already been anticipated by many investors).
Comex March copper also closed up on Friday, rising 1.8 cents, or 0.9%, at $US2.079 a pound – around 1% higher for the week. In London, three-month copper on the London Metal Exchange ended 1.2% higher at $US4612 a tonne.
Aluminium was up 2.8% to finish at $US1514.50 a tonne, zinc ended 2% higher at $US1552 a tonne, but nickel demand was weak and the price was up 1.5% at $US8980 a tonne in trading without a settlement level being set
Lead was 2.1% higher and finished at $US1685, near month highs, and tin added 0.7% to end on $US14,900 a tonne.
