Gold, Oil, Copper, Corn

Sydney, Jan 14, 2008 (ABN Newswire) - According to some reports gold futures prices rose above $US900 an ounce for the first time Friday.

The Associated Press reported that like oil recently when it went above $US100 a barrel, the move by the metal above the $US900 mark in New York was fleetingly brief.

The AP said that gold for February delivery on the New York Mercantile Exchange jumped $US6.50 to $US900.10 in morning trading Friday, an all-time high.

It later slipped to $US898.70 an ounce and closed at $897.70.

Gold has seen a meteoric rise over the past year - rising 32% in 2007 - boosted by the falling US dollar, the growing uncertainty in financial markets from the credit crisis, the slowing US economy and rising prices for oil and other commodities.

Spot gold hit a record $US898.00 an ounce on Friday, but later trimmed gains to $US896.40/$US897.10 in New York compared with $US889.90/US890.60 on Thursday.

Copper rose Friday capping a second straight weekly gain, as investors bought raw materials as a hedge against inflation.

Copper futures for March delivery gained 2.25 USc, to $US3.304 a pound on the Comex division of the New York Mercantile Exchange. The metal has gained 8.6% this month so far on optimism China is back buying strongly, and the presence of financial investors in the copper market.

China's copper imports rose 8.6% last month from December 2006 to 224,553 metric tons, the highest in eight months. 

On the London Metal Exchange, three month copper rose $US110, or 1.5%, to $US7,300 a metric ton ($US3.31 a pound). The metal rose to a record $US8, 800 a ton in May 2006.

Crude oil fell more than $US1 a barrel to a three-week low after investors took a set against the growth prospects of the US and world economies and concluded that lower activity means lower demand for oil: as it always has done in slowdowns.

China, India and other energy deficient emerging markets however should take up some of the slack caused by lower demand in the US and Europe. But there's a belief that China's strong demand may have peaked for the time being as economic growth slows.

Crude oil for February delivery fell $US1.02 to $US92.69 a barrel on the New York Mercantile Exchange, the lowest close since December 20. Oil fell 5.3% over the past week, but is still 79% above the level a year ago.

Oil peaked at a record $US100.09 a barrel on January 3.

Brent crude for February settlement fell to close at $US91.07 a barrel on London's ICE Futures Europe exchange, also the lowest settlement price since December 20.

Last week, Goldman Sachs Group said the US and Japan are at risk of recession. Together, the US, China and Japan, the three biggest oil consumers, account for almost 40% of global oil demand.

The impact of the rise in prices emerged in the US trade deficit which widened more than forecast in November as the country spent a record amount on imported oil. The gap between imports and exports grew 9.3% to $US63.1 billion from $US57.8 billion in October, according to the US Commerce Department.

Deutsche Bank lifted its forecast for crude oil prices this year because of global political tensions and what it called a tight balance between demand and supply. The bank said the benchmark US West Texas Intermediate grade crude and its European counterpart, Brent, will average $US85 a barrel this year, 6.3% more than a previous forecast of $US80 a barrel.

And in Chicago, the first report on world agricultural supply and demand for the year from the US Department of Agriculture has seen a sharp rise in corn prices.

Traders said corn prices rose the daily limit in Chicago, extending a rally to an 11-year high, after the USDA cut its surplus estimate for the grain by 20% because of surging demand for grain to make ethanol and feed livestock.

The USDA said that supplies on August 31 this year, the end of the corn crop year, will total 1.438 billion bushels, down from 1.797 billion forecast in December

Adding to the price tension, the USDA also cut its estimate of the record 2007 harvest by 0.7% and said corn use in the first quarter of the marketing year rose 15%. Prices have gained 45% in the past four months, driven by a battle between buyers for ethanol producers and by buyers for feed and human consumption. Foreign buyers have been strong bidders for the grain, especially from China.

Corn futures for March delivery rose 20 USc or 4.2%, to $US4.95 a bushel on the Chicago Board of Trade, the highest since June 1996.

The price jumped the 20-cent limit imposed by the exchange at the opening of regular trading.

Traders said there were 80,000 unfilled buy orders in the March futures at the close and more than 200,000 unfilled buyer orders in all the 2008 contracts, a sign of the very strong demand for the grain.

Corn rose 17% last year (including the late year surge) after gaining a record 81% in 2006, on increased demand to produce ethanol and feed cattle and poultry. Rising demand from China is adding to the pressure 

A sign of the impact for farmers (positive) and for consumers (negative) came in the department's forecast for a cash corn price at the farm gate of an average $US4 a bushel in the season that began September 1. That's a record, according to the USDA and is up from $US3.65 forecast a month ago and up from $US3.04 a bushel in the previous season (or nearly a third).

The USDA estimated world corn production in the 2007-2008 season, which began October 1, at 766.7 million tonnes, down from 769.3 million forecast in December. That compares with an estimated 703.9 million tonnes harvested last season. Global consumption will rise to 772.7 million tonnes from 766.4 million forecast last month and 721.7 million tonnes, according to the department.

China's problems with food price inflation won't be made any easier by the ISDA's latest forecasts.


 

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