LONDON: Gold prices rocketed to a record high beyond 1,070 dollars per ounce this week, while oil bounced to a one-year peak, as the US currency crumbled in value against the European single currency.
A fading US unit makes dollar-priced raw materials, like gold and oil, cheaper for investors holding stronger currencies.
"So far, dollar weakness has helped lift a number of different assets: crude oil, precious metals, copper and equities," said GFT Global Markets analyst David Morrison.
"But at some stage a rising oil price conflicts with rising equities," he warned.
"If oil does rally on strongly from here then it will constitute a serious headwind to economic recovery, and this will impact on corporate profitability; especially at a time when companies have great difficulty in passing on their costs to consumers."
Nevertheless, commodity markets were boosted this week by mounting hopes of a recovery in the world economy.
"The past week has been extremely positive for commodities, with broad-based gains right across all the major sub-sectors and a particularly strong performance from energy," said Barclays Capital analyst Gayle Berry.
"The recovery in commodities prices has been substantial so far this year, but overall the performance of the sector still looks modest relative to previous recoveries from recession, and we see the prospect of further, though more modest, index gains over the rest of this year."
PRECIOUS METALS: The price of gold hit a record 1,070.80 dollars per ounce on Wednesday, as the precious metal was boosted by the weak dollar, before pulling lower on profit-taking.
The latest pinnacle was forged as the euro surged above 1.49 dollars for the first time since August 2008. It subsequently rallied to a 14-month high of 1.4968 on Thursday.
In recent days and weeks, gold has enjoyed a record-breaking run as the tumbling dollar has stimulated demand. The glamorous yellow metal is used in jewellery, dentistry and electronics.
Gold, viewed as a safe-haven investment, has won back favour in recent months as the global economy struggles out of its worst slump in decades.
In the wake of gold’s stellar run, sister metal silver hit a 14-month peak of 18.08 dollars an ounce. Palladium reached the highest points since August 2008, while platinum scaled a level last seen in September last year.
By late Friday on the London Bullion Market, gold eased to 1,047.50 dollars an ounce from 1,051.50 dollars a week earlier.
Silver slipped to 17.31 dollars an ounce from 17.63 dollars.
On the London Platinum and Palladium Market, platinum climbed to 1,346 dollars an ounce at the late fixing on Friday from 1,337 dollars.
Palladium firmed to 326 dollars an ounce from 323 dollars.
OIL: The price of oil struck a one year-high above 78 dollars thanks to the weak US dollar and signs of a pick-up in energy demand, traders said.
New York’s main contract, light sweet crude for November delivery, hit 78.17 dollars a barrel on Friday — the highest level since October 14, 2008.
"The recent price rise has been very impressive," added Sucden Financial Research analyst Nimit Khamar.
"Markets could well test 80 dollars but in our opinion a correction next week is the likely scenario to back below 75 dollars and even to the low 70s given oil fundamentals remain poor, global inventories are still high and demand recovery is far from convincing."
A US government report published Thursday showed gasoline, or petrol, stocks fell by 5.2 million barrels in the country last week. Analysts polled by Dow Jones Newswires had expected a rise of 700,000 barrels.
The fall in gasoline stocks indicates rising demand and tightening supplies, supporting prices, traders said.
US crude reserves meanwhile rose by 400,000 barrels last week, lower than most analysts’ expectations for a gain of 600,000 barrels.
Despite signs of a demand pick-up appetite for oil has plunged amid the world economic downturn, the most severe since the 1930s.
Oil prices tumbled from historic highs of more than 147 dollars in July 2008 to about 32 dollars in December because of the global recession but have since won back ground on recovery hopes.
World oil demand will decline slightly in 2009 but start growing again next year, the OPEC oil producers’ cartel said this week in its latest monthly report.
Global crude demand this year was expected to contract by 1.41 million barrels per day (bpd) to 84.24 million bpd, the Organization of Petroleum Exporting Countries said in its October report.
A month ago, OPEC had been pencilling in a fractionally bigger contraction of 1.56 million bpd for this year.
By Friday on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in November surged to 77.32 dollars from 71.89 dollars a week earlier.
On London’s InterContinental Exchange (ICE), Brent North Sea crude for December delivery jumped to 75.93 dollars a barrel compared with 70.14 dollars for the expired November contract a week earlier.
BASE METALS: Base metals prices steadied after winning a boost earlier this week from the plunging dollar.
So far this year, prices have soared on solid demand from emerging economies despite the global economic downturn.
The worldwide financial crisis that erupted in late 2007 and dragged most major economies into recession sent prices of industrial, or base, metals tumbling in 2008.
However, demand has returned, notably from China and India, helping to boost prices, according to movers and shakers attending the London Metal Exchange (LME) Week, an annual industry event that ended on Friday.
LME metals prices have soared in 2009, with copper, lead and zinc doubling since the start of January.
"Something surprising three months ago — there was a pick-up of industrial activity in emerging markets, especially China," Danny Quah, economics professor at the London School of Economics, told delegates at LME Week.
The plight of the battered world economy is closely intertwined with base metals because the likes of aluminium, copper, lead and zinc are key resources for modern industry.
"London Metal Exchange prices tend to lead economic conditions," said Jeremy Christian, Managing Director at commodities consultancy CPM Group.
Some base metals, however, have seen price gains capped. Aluminium, for example, has taken a hit from the collapse of the global automaking sector.
By Friday on the London Metal Exchange, copper for delivery in three months eased to 6,200 dollars a tonne from 6,260 dollars a week earlier.
Three-month aluminium gained to 1,915 dollars a tonne from 1,895 dollars.
Three-month lead decreased to 2,197 dollars a tonne from 2,260 dollars.
Three-month tin dipped to 14,400 dollars a tonne from 14,700 dollars.
Three-month zinc slid to 2,040 dollars a tonne from 2,066 dollars.
Three-month nickel slipped to 18,626 dollars a tonne from 19,053 dollars.
COCOA: Cocoa prices eased lower on profit taking after striking a 24-year high the previous week of 2,185 pounds a tonne on prospects of falling output in top producing nation Ivory Coast.
By Friday on LIFFE, London’s futures exchange, the price of cocoa for delivery in December slid to 2,119 pounds a tonne from 2,150 pounds a week earlier.
On the New York Board of Trade (NYBOT), the December cocoa contract climbed to 3,278 dollars a tonne from 3,248 dollars.
SUGAR: Sugar futures rose but held below the 28-year high of 640.50 pounds per tonne that was struck earlier this month on concerns over tight supplies.
By Friday on LIFFE, the price of a tonne of white sugar for delivery in March rose to 605.90 pounds from 573 pounds a week earlier.
On NYBOT, the price of unrefined sugar for March advanced to 23.11 US cents a pound from 22.62 cents.
GRAINS AND SOYA: Prices climbed as recent freezing weather in key producer the United States threatened to reduce harvests and cut supplies. The market also increased on the back of the struggling US dollar.
"Freezing temperatures covered portions of the US midwest this past weekend," said Morgan Stanley analyst Hussein Allidina.
"In multiple states, temperatures dropped below the 28 degrees Fahrenheit (-2.2 Celsius) — a temperature at which some yield loss is certain, particularly given the much delayed crop.
"As a result, a wide array of potential damage estimates to the US corn and soybean crop estimates has circulated in the markets."
By Friday on the Chicago Board of Trade, maize for delivery in December climbed to 3.71 dollars a bushel from 3.62 dollars a week earlier.
January-dated soyabean meal — used in animal feed — increased to 9.90 dollars from 9.67 dollars.
Wheat for December gained to 5.05 dollars a bushel from 4.68 dollars.
COFFEE: Coffee futures gained ground.
By Friday on LIFFE, Robusta for delivery in January rose to 1,501 dollars a tonne from 1,484 dollars a week earlier.
On the NYBOT, Arabica for December increased to 141.50 US cents a pound from 138.60 cents.
RUBBER: Malaysian rubber prices advanced, lifted by higher oil prices and optimism regarding a global economic recovery, dealers said. Crude oil is used in the production of synthetic rubber.
On Friday, the Malaysian Rubber Board’s benchmark SMR20 rose to 228.96 US cents per kilo, from 221.65 US cents per kilo last week.