Global commodity markets witnessed contrasting fortunes this week, as investors tracked US Federal Reserve stimulus measures, the weak US dollar, EU debt tensions and broadly upbeat economic data.
Most commodities were lifted after the US central bank said it would replace its “Operation Twist” bond-swapping program with US$45 billion a month in straight bond buys on an open-ended basis. That comes on top of the US$40 billion a month purchasing announced in September.
The Fed also provided a surprise by saying it would not lift rates as long as the inflation outlook was below 2.5 percent and the jobless rate, now at 7.7 percent, stays above 6.5 percent.
Many markets also won a boost as the greenback fell in reaction. That makes US dollar-priced commodities cheaper for buyers using stronger currencies.
However, sentiment remains plagued by worries over the looming “fiscal cliff” of automatic taxation hikes and spending cuts due to start on Jan. 1 and which could plunge the US economy into recession.
OIL: World oil prices began the week on the backfoot after Italian Prime Minister Mario Monti’s shock announcement of his intention to resign, in the latest twist to the eurozone debt crisis.
The political uncertainty in debt-laden Italy deepened after former Italian prime minister Silvio Berlusconi revealed that he would challenge Monti in next year’s election.
Sentiment was lifted after the EU agreed to unlock Greece’s latest tranche of bailout cash, and on the back of positive economic data in China and the US.
Crude futures rose on Wednesday after OPEC held its oil output ceiling at 30 million barrels per day as expected and as the US dollar fell further on the Fed’s expansion of its bond-buying stimulus program.
By Friday on the New York Mercantile Exchange, West Texas Intermediate (WTI), or light sweet crude, for delivery next month rose to US$86.51 a barrel from US$86.27 a week earlier.
On London’s Intercontinental Exchange, Brent North Sea crude for January increased to US$109.00 a barrel from US$106.53.
PRECIOUS METALS: “The gold market remains in the doldrums ... despite the announcement of a further round of quantitative easing by the US Fed,” Deutsche Bank analysts said.
By late Friday on the London Bullion Market, gold slipped to US$1,696.25 an ounce from US$1,701.50 a week earlier.
Silver slid to US$32.52 an ounce from US$32.85.
On the London Platinum and Palladium Market, platinum gained to US$1,613 an ounce from US$1,600.
Palladium climbed to US$700 an ounce from US$698.