Oil

BRENT crude dropped on April 7 in Asian trade after five straight days of gains, slipping below $122 a barrel on concern that rising prices will hurt demand from the world’s top oil consumers the United States and China.

Unrest in oil exporting regions North Africa and the Middle East continues to support prices, as investors fear the turmoil could hamper more supplies after civil war interrupted the flow from Libya.

Brent crude fell 54 cents to $121.76 a barrel rising to a 2-½-year high above $123 on April 6. US crude futures declined 51 cents to $108.32 a barrel after touching $109.15 a day earlier, the highest since September 2008. High crude prices are pushing up retail fuel prices worldwide, exacerbating the inflationary pressure governments face from the rising cost of food and raw materials.

The International Energy Agency said on April 6 that the current oil price is harming global economic growth and is a mounting concern for consuming nations. Saudi Arabia and the United Arab Emirates have raised output to compensate for supply loss from Libya but there has been no coordinated supply policy response from Opec to rein in high prices.

The latest data from the United States showed that gasoline and distillate demand has stalled while China raised retail prices to record highs to ease the burden of higher crude prices for state refiners. US government data on April 6 showed gasoline demand at the world’s top oil consumer fell 1.2 per cent from year-ago levels. Gasoline demand should pick up as the driving season begins in the United States, but high prices would temper growth in consumption.

Oil prices will soar above $130 a barrel by late 2011, a new Reuters poll found, and one in five traders said they expected oil to hit $150 this year, levels some economists say could trigger recession.

With no end in sight to the unrest in the Middle East and North Africa, the majority of the 32 major oil traders, bank analysts and hedge fund managers surveyed by Reuters said they expect oil prices to resume their climb later this year after a short-term retreat.

Brent futures, a global benchmark oil contract, has risen almost $8 over the past five days to settle at $122,30 on April 6. They have jumped above $120 a barrel last week for the first time since 2008. World oil prices in the $130-$150 range ring alarm bells for macroeconomic forecasters.

In the New York market, Brent rose to 2½ year high above $123 a barrel on April 6. Mounting evidence that fighting in Libya, an Opec member, could continue to disrupt oil supplies as well as simmering tensions in the Middle East region has pushed up prices. The IEA warned that the current prices could slow the global economy, but members of Opec insist that the market remains well supplied.

Gold

GOLD rose and silver surged to 31-year highs on April 4, as the fresh gains that pushed oil and grain prices to their highest since 2008 stoke inflation worries. While silver streaked ahead, rising to its strongest relative to gold since 1983 bullion prices have struggled for the past month to sustain new highs.

Activity in the US futures market on April 4 was less than half the average, set to be one of the weakest this year, as the metal struggled to extend its record high $1,447.40 an ounce set on March 24. Spot gold rose 0.4 per cent to $1,433 an ounce off an earlier high of $1,438.55 an ounce.

Rising oil and grain prices boosted gold’s inflation hedge appeal. US oil rose to a 2-½-year highs on geopolitical risks to supply from the Middle East, while corn futures rallied to the highest level since the 2008 global food crisis due to very tight supplies.

Silver climbed to its highest in 31 years at $38.58 an ounce, sending the gold-to-silver ratio to its lowest level in 18 years. It was later up two per cent at $38.48.

Silver prices are fast closing in on $40 an ounce, lifted by interest in the metal as a cheaper proxy for gold and expectations that industrial demand is set to improve. But analysts remain wary of silver’s extreme volatility, which has led to some heart-stopping reversals in recent years.

Gold rose to an all-time high for a second straight day on April 6 as the dollar fell to a 14-month low against the euro ahead of an expected interest rate hike from the European Central Bank (ECB).

Spot gold hit a record $1,461.91 an ounce before easing to $1,458.90 an ounce, up 0.6 per cent, US gold futures for June delivery settled up 0.4 per cent to $1,458.50. Gold remained far below its all-time inflation-adjusted high, estimated at almost $2,500 an ounce set in 1980 as a result of heightened geopolitical pressure and hyperinflation.

Gold was boosted as the euro climbed against the dollar to its highest in more than a year. The ECB was widely expected to raise its benchmark rate 25 basis points on April 7, its first hike since the global economic crisis three years ago.

Higher interest rates usually weigh on gold, but the metal could gain if rate differentials weaken the dollar.

Meanwhile, reflecting the pick-up in investors demand for gold was the first inflow of metal into the SPDR Gold Trust, the world’s largest exchange-traded fund, since March 16.

Holdings of silver in the world’s largest ETF, the iShares Silver Trust are at a record 11,162.45 tonnes, having risen by more than 240 tonnes so far this year.

Silver has reaped the benefits of investor demand for safe-haven assets and protection from inflation and on April 06 rose to its highest level since January 1980.

Gold hit a fresh record high near $1,465 an ounce on April 07 after European Central Bank president Jean Claude Trichet indicated the rate hike announced by the bank earlier may not be the first in a series.

Gold tends to suffer in a rising interest rate environment, as this raises the opportunity cost of holding non-interest bearing bullion. Expectations for a rise in euro zone rates kept a lid on gold’s rally to record highs earlier this year.

Copper

IN the London market, copper reached its highest in about two weeks on April 7, supported by bullish comments from a key copper conference in Santiago, while tin closed in on record highs.

Copper for three-months delivery CMCU3 on the London Metal Exchange traded up 1 per cent at $9,700.50 a tonne at 0925 from close of $9,605 on April 6. Mining companies attending the CRU world copper conference in Chile made upbeat comments about prospects for the metal.

Prices are up some eight per cent from mid-March, when they dipped just below $9,000 a tonne. They are now 5 per cent off a record high of $10,190 hit in mid-February.

Copper has risen, supported by non-US investors as the euro hit its highest in more than a year versus the dollar and on prospects of better commodity imports date from top consumer China.

The market expected China’s copper, iron ore and coal imports in March to rebound, with March shipments of refined copper expected to rise from February’s 27-month low.

Aluminium rose to $2,685 a tonne, its highest since September 2008. It later closed at $2,670 versus April 5 $2,641 close, partly lifted by strong energy prices. Energy accounts for about 40 per cant of the cost of producing aluminium. Open interest on aluminium LME contracts are near their highest since the middle of January. Aluminium was later at $2,656 per tone.

Latest data showed inventories of the metal in LME warehouses were down 4,175 tonnes at 4,589,000, but remained consistently high and within reach of a record high 4,640,750 tonnes hit in January last year.

Tin CMSN3 hit a session high of $32,790, just 9 dollars of a record peak scored in mid-February. The metal later traded at $32,570 a tonne from a close of $32,100.

Keeping optimism about nearby demand in check, copper inventories MCU-STOCKS at LME warehouses rose 1,500 tonnes to total 442,375 tonnes, at their highest since early July after rising steadily since December.

Recent weakness in the dollar has supported metals by attracting non-US investors.

Aluminium CMAL3 traded at $2,687 a tonne from $2,670 and zinc CMZN3 was at $2,456 a tonne from $2,450.

Copper reached its highest price levels in about two weeks on April 07 after Portugal announced it would accept a bailout from the European Commission, but then pared some gains as a new earthquake hit Japan. Copper for three-month delivery on the London Metal Exchange (LME) closed at $9,670 a tonne, from a close of $9,605 on April 06. It hit a two-week high at $9,753 a tonne as markets welcomed debt-ridden Portugal’s announcement it would make a formal request for European aid.