Gold hit another historic high this week close to US$1,200 per ounce as trade was driven by central bank purchases and the struggling greenback, before pulling lower as Dubai rattled global markets.
Many investors dumped shares in alarm on Friday, sending Asian and US markets plunging as fears of debt defaults sowed fresh concern for the world economy after Dubai’s shock request to suspend major loan repayments.
However, Europe’s leading stock indices rebounded, reversing earlier sharp losses that were driven by Dubai’s shock debt announcement.
“News from Dubai, according to which two local state-owned companies plan to reschedule their debt, lead to a firmer US dollar, which in turn had put gold massively under pressure,” Commerzbank analyst Carsten Fritsch said.
The development “put commodity prices across the board under great pressure,” Fritsch added.
PRECIOUS METALS: Gold hit a record high above US$1,195 an ounce for the first time, spurred by a purchase of IMF gold by Sri Lanka’s central bank, before pulling lower as the news from Dubai hit traders’ screens.
On the London Bullion Market, gold surged as high as US$1,195.13 on Thursday, extending its record-breaking run, before sliding as investors cashed in profits.
Gold won support in recent weeks from inflationary fears and increasing moves by central banks to diversify assets into gold.
The IMF said on Wednesday it had sold 10 tonnes of gold to Sri Lanka’s central bank for US$375 million as part of a restructuring of its financial resources.
The latest sale brought the total IMF gold sold to central banks to 212 tonnes. India bought 200 tonnes last month for US$6.7 billion and Mauritius bought 2 tonnes on Nov. 11 for US$71.7 million.
Prices had also smashed their way to record levels on Wednesday on a newspaper report that India was mulling the purchase of more IMF gold reserves.
By late Friday on the London Bullion Market, gold rallied to US$1,166.50 an ounce from US$1,140 a week earlier.
Silver dipped to US$17.98 an ounce from US$18.18.
On the London Platinum and Palladium Market, platinum slid to US$1,426 an ounce at the late fixing on Friday from US$1,435 the previous week.
Palladium eased to US$358 an ounce from US$360.
OIL: The price of oil slumped to a seven-week low point close to US$72 on Friday with investors spooked by a shock call from the Dubai government to suspend the debt of a key state company, analysts said.
New York’s main contract, light sweet crude for January delivery, reached US$72.39 — the lowest level since the start of last month.
“The sole reason for the oil price dump can be summed up in one word: Dubai,” said Tamas Varga, an analyst at PVM Oil Associates. “If the 2008 recession was started by banks overlending then the current debt problem in Dubai is a big warning sign that we’re not out of the woods yet.”
Oil prices began falling sharply on Thursday as news of Dubai’s request emerged.
By Friday on the New York Mercantile Exchange, light, sweet crude for delivery in January slid to US$74.90 compared with US$76.71 a week earlier.
On London’s InterContinental Exchange, Brent North Sea crude for January delivery sank to US$76.10 from US$77.03 a week earlier.
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