Commodity prices faced a choppy week as further stimulus tapering from the US Federal Reserve and turmoil across emerging markets overshadowed solid fourth-quarter economic growth in the US.
The Fed said on Wednesday that it will reduce its bond-buying or quantitative easing (QE) program by US$10 billion to US$65 billion a month, citing a pick-up in the economy. The news sent emerging market currencies plunging in India, South Africa and Turkey, despite a raft of interest rate hikes.
Sentiment won a boost on Thursday as official data showed the US economy — a key consumer of raw materials — grew 3.2 percent in October-December, beating predictions of 3.0 percent.
OIL: New York prices rallied to the highest level so far this year on forecast-beating fourth-quarter economic growth in the US, which is the world’s biggest crude consuming nation.
“US GDP figures boosted demand expectations of the world’s biggest oil consumer,” said Michael Hewson, an analyst at traders CMC Markets UK.
Crude futures also soared on higher demand for heating fuel thanks to recent cold weather in the US.
US benchmark West Texas Intermediate surged on Thursday to US$98.59 per barrel, the highest point since Jan. 2.
Prices tailed off on Friday on weak Chinese data in subdued deals, with most Asian markets shut for the Lunar New Year holiday.
“With Chinese markets closed for the majority of the coming week and fears of emerging market contagion spreading from Turkey, Argentina and India as they struggle to control inflation, investors may opt to remain on the sidelines,” Sucden analyst Kash Kamal said.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in March stood at US$107.18 a barrel from US$107.24 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for March rallied to US$97.84 a barrel compared with US$96.64 a week earlier.
PRECIOUS METALS: Prices fell as the dollar rose following news of US stimulus reduction and upbeat growth.
The news also weighed on gold because many investors argue that QE fuels higher inflation. Gold is widely regarded as a hedge against inflation.
Platinum and palladium meanwhile hit one-month lows at US$1,366.75 and US$704.50 respectively, despite ongoing strikes in major producer South Africa.
“Precious metals are once again finding themselves in the red as the week draws to a close,” analyst Fawad Razaqzada at online trading firm Forex.com said. “The main reason for their sluggish performance is to do with the firmer US dollar which has gained ground on the back of the upbeat GDP print and after the Fed tapered QE by an additional US$10 billion.”
By late Friday on the London Bullion Market, the price of gold fell to US$1,251 an ounce from US$1,267 a week earlier.
Silver dipped to US$19.31 an ounce from US$20.19.
On the London Platinum and Palladium Market, platinum slid to US$1,382 an ounce from US$1,443.
Palladium slipped to US$707 an ounce from US$745.
BASE METALS: Industrial metals prices sank as traders also fretted over turmoil in emerging markets and the outlook for Chinese demand.
By Friday on the London Metal Exchange, copper for delivery in three months slid to US$7,063 a tonne from US$7,210.50 week earlier.
Three-month aluminum fell to US$1,713.50 a tonne from US$1,768. Three-month lead retreated to US$2,108 a tonne from US$2,152.