Swept up in a global markets selloff on concerns about economic growth, oil prices tumbled on Friday as investors snared profits from a recent rally.
Risk aversion dominated ahead of the US Federal Reserve’s interest rate decision on Wednesday and Britain’s vote on leaving the EU the following week.
“We definitively have seen concerns about the global economic outlook... Generally speaking, there’s a kind of flight to quality,” Phil Flynn of Price Futures Group said. “You have people buying gold, selling the stock market and selling oil because of the concerns.”
US benchmark West Texas Intermediate for July delivery dropped US$1.49 to US$49.07 on the New York Mercantile Exchange, ending below US$50 for the first time since Monday.
In London, Brent North Sea crude for delivery in August, the European benchmark, fell US$1.41 to US$50.54 a barrel.
Looming over the markets was Britain’s June 23 referendum, which could lead to the country splitting from the 28-nation EU.
The potential Brexit raises concerns it would hurt European economic growth, pushing investors to cut risk exposure, Tim Evans of Citi Futures said.
“The oil market is seeing its own flow of related selling, with traders inclined to cash profits off recent gains ahead of the weekend,” Evans said.
PRECIOUS METALS: After trailing gold last month, silver is outshining the yellow metal again.
An ounce of gold bought as little as 73.1 ounces of silver on Friday, the smallest ratio in almost a month. Holdings in exchange-traded funds backed by silver are nearing an all-time high. This month, spot silver is up about 8.2 percent, compared with gold’s 4.9 percent increase.
Gold and silver have rallied this year on speculation that US interest rates will stay lower for longer. Low rates are a boon to precious metals, which offer returns only through price gains. Silver is getting an added boost from supply concerns.
Silver for immediate delivery gained 0.2 percent to US$17.3083 an ounce, heading for a third straight gain, according to Bloomberg generic pricing as of 2:03pm in New York.
Gold for immediate delivery rose 0.3 percent to US$1,274.09 an ounce, also set for a third straight increase.
BASE METALS: Dr Copper’s health has taken a turn for the worse.
After a brief rally this year, evidence is piling up that prices are going to head lower. This week, warehouses tracked by the London Metal Exchange (LME) saw the biggest increase in metal than than any time in the past decade. Copper prices on the LME have dropped 11 percent since the end of April.
The metal — known as Dr Copper because it seems to have an economics PhD for its ability to track the world’s economic health — started the year with a wave of optimism: Prices were close to entering a bull market on expectations of production cuts and better Chinese demand.
In March, money managers were the most bullish on US futures in nine months.
It did not last. There is still a lot of copper stashed in warehouses around the world and money managers are now betting on more declines.
Copper for delivery in three months fell 0.1 percent to settle at US$4,510 a tonne on the LME. It set this year’s low of US$4,318 in mid-January.
Aluminum, nickel and lead fell on the LME, while zinc and tin gained.
Steelmakers also slumped.
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