Commodities suffer volatile week; gold 'ultimate' safe haven

21 Jun, 2015

Commodities experienced a volatile week, as traders eyed the oil supply glut, the dollar and intensifying concerns that Greece could default and crash out from the eurozone. The EU has called an emergency eurozone summit in Brussels for Monday, seeking to break the five-month deadlock between the anti-austerity government in Athens and its international creditors.
"Looking ahead to next week, the focus of attention will remain with Greece," said analyst Julian Jessop at research group Capital Economics. "Unless there is a significant breakthrough in the emergency leaders' summit on Monday, which we deem unlikely, the prolonged uncertainty will continue to undermine commodity prices."
Greece insists a last-ditch deal on its debt is possible, but the European Central Bank held Friday an emergency meeting to increase its financial lifeline Greek lenders as fears grew of a run on Greek banks after a rush of deposit withdrawals. The European single currency fell Friday to $1.1334. The stronger greenback makes dollar-denominated commodities like oil more expensive for buyers using weaker currencies.
That tends to cap demand and send prices lower. However, on Thursday the euro had struck a one-month peak at $1.1436 in a jump driven by incorrect reports that Greece had won a delay in its debt payments. Meanwhile the oil market rose Thursday as dealers reacted to the US Federal Reserve's decision the previous day to leave its key interest rate unchanged. The world's most powerful central bank said it would adopt a cautious and methodical approach to raising them later in the year.
Elsewhere, investors remain concerned that top producer and de-facto Opec cartel leader Saudi Arabia could boost output in an already over-supplied market, analysts said. Investors have previously voiced concern over Opec's strategy of maintaining high output levels to hurt US shale producers. The resulting huge global supply glut has been attributed as the main cause for oil prices collapsing by more than 50 percent between June 2014 and January. By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in August slid to $62.66 a barrel from $64.35 a week earlier for the expired July contract. On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for July dipped to $59.40 a barrel from $59.99 a week earlier.
"Consolidation above $1,200 is a good first step if the metal is to attempt to regain the May highs, and a deterioration in the Greek situation should provide some modest upward force for the metal." Gold is widely regarded by investors as a safe bet in times of economic uncertainty. International creditors insist Athens must do more in return for the needed funding if it is to meet a debt repayment of around 1.5 billion euros to the International Monetary Fund on June 30.
"As the situation of Greece's payment to the IMF on June 30 remains in the limelight, volatility in gold price may be affected in the coming days," cautioned analyst Merav Brenner at options trading platform provider ORE. By Friday on the London Bullion Market, the price of gold gained to $1,203.40 an ounce from $1,182.80 a week earlier. Silver advanced to $16.12 an ounce from $15.93. On the London Platinum and Palladium Market, platinum edged down to $1,085 an ounce from $1,095. Palladium fell to $718 an ounce from $739.
"Industrial metals prices were particularly hard hit as Chinese economic data remained soft." By Friday on the London Metal Exchange, copper for delivery in three months fell to $5,667.50 a tonne from $5,898.50 a week earlier.
-- Three-month aluminium reversed to $1,690.50 a tonne from $1,748.50.
-- Three-month lead slid to $1,792 a tonne from $1,852.50.
-- Three-month tin rose to $15,210 a tonne from $14,940.
-- Three-month nickel edged down to $12,620 a tonne from $13,035.
-- Three-month zinc dipped to $2,052 a tonne from $2,112.50.
"While concerns about supply constraints have helped support cocoa and robusta prices, the opposite is true for sugar which continues to be weighed down by huge global supplies." By Friday on Liffe, London's futures exchange, cocoa for delivery in September climbed at £2,155 a tonne, from £2,094 for the July contract the previous week. On the ICE Futures US exchange, cocoa for September rose to $3,296 a tonne from $3,109 for the July contract the previous week.
By Friday on Liffe, a tonne of white sugar for delivery in August dipped to $346.30 from $346.80 a week earlier. On ICE Futures US, unrefined sugar for October was unchanged at 11.67 US cents from a week earlier for the July contract.

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