Commodity prices diverged this week as markets focused on a deal to avert a US-led military attack on Syria and reacted to the US Federal Reserve’s surprise decision on stimulus.
The US and Russia had last weekend agreed on a deal to dismantle Syria’s chemical weapons, easing crude supply fears.
The week’s other major market-moving event occurred on Wednesday when the Federal Open Market Committee (FOMC) decided against scaling down its US$85 billion a month bond-buying spree.
The FOMC said that although the economy appears to be holding up amid government spending cuts, it “decided to await more evidence that progress will be sustained” before deciding to scale down the stimulus package.
OIL: Crude futures retreated over the week following volatile trading triggered by easing Middle East supply concerns and the Fed’s surprise action.
“The main focus has returned to the oil [supply and demand] fundamentals,” said Myrto Sokou, senior research analyst at Sucden brokers.
Analysts said the return to production of Libyan oil fields and the easing of tensions in the Middle East after Syria agreed to a plan to put its chemical weapons arsenal under international control helped ease prices.
Protests by oil field and export terminal workers since July had crippled Libyan production.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in November stood at US$109.05 a barrel compared with US$111.90 for the expired October contract a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for October dropped to US$105.59 a barrel from US$107.58.
PRECIOUS METALS: Prices rose following the Fed announcement.
Gold dropped below US$1,300 an ounce for the first time since Aug. 8 on Wednesday before the Fed’s policy decision.
Traditionally a hedge against inflation, gold had tumbled on growing speculation over Fed tapering. Many investors argue that QE fuels higher inflation.
However, prices soon rebounded. By late Friday on the London Bullion Market, the price of gold rose to US$1,349.25 an ounce from US$1,318.50 a week earlier.
Silver climbed to US$22.74 an ounce from US$21.72.
On the London Platinum and Palladium Market, platinum edged up to US$1,447 an ounce from US$1,441.
Palladium grew to US$726 an ounce from US$700.
BASE METALS: Base or industrial metals rebounded.
“Metal prices surged noticeably following the Fed’s meeting,” Commerzbank analysts said.
However, Julian Jessop, head of commodities research at Capital Economics consultants, said that “industrial metals are far more sensitive to the near-term prospects for economic activity than to the outlook for monetary policy, with developments in China typically more important than those in the US”.
Three-month aluminum rose to US$1,827 a tonne from US$1,791.50.
Three-month lead grew to US$2,105 a tonne from US$2,091.50
Three-month tin gained to US$23,285 a tonne from US$22,579.
Three-month nickel increased to US$14,370 a tonne from US$13,692.