Commodities: Gold continues to decline, base metals falter

Gold continued to post declines on Friday, as base metal futures slipped lower while oil benchmarks endured another volatile session.

Precious metals lost further ground for much of the day. By 1601 BST COMEX gold for December delivery was down 0.56% or $6.30 at $1,118.20 an ounce, while spot gold was down 0.36% or $4.16 at $1,121.30. Concurrently, COMEX silver was down 1.07% or 16 cents at $14.55 an ounce, while spot platinum was down 1.17% or $11.78 to $994.85, breaching $1,000-level for the first time this week.

Kelly-Ann Kearsey, dealing manager at GoldMoney, said, “Gold rallied to a one week high on Tuesday before slipping back again, but it’s treading water right now. Its fortunes were hit by a stronger dollar on reasonably positive US data this week.

“It has given hope to a more imminent rate rise in the US, despite warnings from the IMF that the US and UK should not be in a hurry to raise interest rates while potential repercussions from the Chinese economic slowdown play out. While, on the one hand, the Chinese downturn could boost gold’s safe haven appeal, the fact that China is the world’s largest consumer of the yellow metal may result in a reduction in demand.”

Base metal futures endured another torrid session. Past the midway of trading on the London Metal Exchange, three-month futures contracts of primary aluminium (down 0.2%), copper (down 1.5%), lead (down 1.6%), nickel (down 2.4%), tin (down 0.3%) and zinc (down 1.6%) were trading lower.

Kevin Norrish, senior analyst at Barclays, said, “The decline in commodities since early 2011 has gathered pace recently. Given the structural negatives of a slowing China, oversupply and a strong dollar, it may not be too long before the long-term bearish trend reasserts itself.”

Oil benchmarks continued to fluctuate, even though the price swings were nothing compared to earlier in the week. Both Brent and WTI were in positive territory during the Asian session, but it did not last as European trading picked up pace.

Both benchmarks also saw brief periods in positive territory during early US trading but did not gather enough momentum to stay there. At 1616 BST, the Brent front-month futures contract was down 1.24% or 63 cents at $50.05 per barrel, while the WTI was 1.20% or 56 cents lower at $46.19 per barrel.

Finally, the agricultural commodities market saw another mixed session. CBOT corn (up 0.11%) and wheat (up 0.43%) futures recovered from lows earlier in the week. ICE cocoa futures contract was up 2.34%, while cotton and CME live cattle futures were down 0.46% and 0.62% respectively.