Energy prices fell on Friday, giving up a good chunk of the gains made in a rally the day before in anticipation of a winter storm that hit the US Northeast.
Natural gas futures retreated from record territory above US$15 per 1,000 cubic feet, while oil futures dipped below US$60 a barrel.
January natural gas futures declined by US$0.682 to settle at US$14.312 on the New York Mercantile Exchange. On Thursday, the contract settled at a record high of US$14.994, and in overnight electronic trading rose to a record US$15.52.
Light, sweet crude oil for January delivery fell US$1.27 to close at US$59.39 a barrel. In London, Brent crude futures declined by US$1.36 to US$57.31 a barrel on the ICE Futures exchange.
Broker Tom Bentz at BNP Paribas Commodity Futures in New York attributed Friday's selloff to profit-taking but said, in spite of the pullback, energy prices will remain high so long as colder temperatures hang around.
A storm that dumped as much as 25cm of snow from Texas to Indiana hit the US Northeast on Friday, shutting down schools and snarling traffic as commuters headed to work on slippery roads.
While the storm system lost steam as it crossed the Ohio Valley and western Pennsylvania early on Friday, it was expected to merge with another one off the Virginia coast later in the day. Forecasters said the system would move up the coast, bringing as much as a foot of snow to New England.
"The price rise is all based on forecasts of cold weather to hit large portions of the United States," said Victor Shum, a Singapore-based analyst at energy consultants Purvin & Gertz.
"The weather affects natural gas, but the [trading] psychology also affects the oil market," he said.
In other Nymex trading, heating oil futures fell US$0.0514 to US$1.7318 a gallon, and gasoline dipped by US$0.0217 to US$1.6049 a gallon.
"Winter has a long way to go. The market psychology supports a rather high price. This is only December; the anticipation of the continuation of colder weather will provide a high price floor," Shum said.
OPEC meets tomorrow in Kuwait, where it may give hints about its pricing policy for next year. Most analysts are not expecting OPEC to cut output when it meets. Typically, the organization considers reducing output when stocks start building and prices fall.
Gold extended its sharp runup on Friday on more momentum-based speculative and fund buying, as well as concerns about inflation.
Spot gold rose US$7.70 to settle at US$527 an ounce on the New York Mercantile Exchange, after hitting a fresh 24-year high of US$531 earlier on Friday.
February gold, the most active gold contract, rose US$7.50 to settle at US$530.20 an ounce, after climbing as high as US$534.30.
A number of traders had been targeting gold's April 1981 high of US$535, said Frank Lesh of Rand Financial Services.
"Specs are buying and funds are buying. People are long and happy about it. It's just a continuation of the trend," he said.
Meanwhile, spot silver rose US$0.106 to settle at US$9, and March silver, the most active silver contract, rose US$0.105 to settle at US$9.095 an ounce, after reaching a contract high of US$9.14. Silver is trading at levels not seen since 1987.
Lesh said that while some traders have booked profits after the runup, others are using their profits to add to their long positions.
Gold has risen all seven business days this month. At the session high, the market was up US$35.60, or 7 percent from its price at the end of last month.
Worries about inflation have made their way into the marketplace, and these worries could send the metal considerably higher yet, said Peter Schiff, president of Euro Pacific Capital. In particular, Schiff pointed to increasing money supply from the Federal Reserve and other central banks around the world.
"That's making money less valuable, and you can see the value of money declining relative to gold," he said. "Gold is how you measure paper currency. When gold is rising, it means currencies are losing value and purchasing power."
Due to its monetary use, gold moves on factors other than general supply and demand fundamentals, as is the case with commodities such as oil and soybeans, Schiff added.
"When gold is going up like this, that's telling you something," he said. "It's not just some other metal. Gold is being bought as money."
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