Thursday, December 29, 2011

COMMODITIES-Oil snaps 6-day run-up; gold at 3-month low

NEW YORK (Dec 28) - Oil closed lower Wednesday, snapping a six-day run-up,and gold prices fell too, hitting three-month lows, as a rally in the dollar pressured commodities denominated in the U.S. currency.

Agricultural markets largely bucked the trend. Corn and wheat extended gains from Tuesday on worries about dry weather in key growing nation Argentina. Arabica coffee hit a three-week high on fund short-covering.

The 19-commodity Thomson Reuters-Jefferies CRB index fell 1 percent, weighed down by the drop in U.S. crude oil, its main component, and losses in gold, silver and base metals such as copper.

Oil's previous lower close was on Dec. 15, with prices supported thereafter by lower-than-anticipated U.S. crude stockpiles and tensions between key producer Iran and the West.

Wednesday's selloff was pinned on the strength of the dollar versus the euro.

The euro fell to a near one-year low against the dollar as the reluctance to lend by euro zone banks made investors fear more about the region's economic recovery amid its debt crisis. Data released ahead of an important Italian bond sale showed European banks hoarding cash, raising questions about the demand for key raw materials related to growth, such as oil.

"The worry is that (European) banks are borrowing and then sitting on the money and not lending it, and that will limit growth just like it did in the United States," said Mark Waggoner, president at Excel Futures Inc, an oil and commodities broker in Bend, Oregon.

U.S. crude fell $1.98, or almost 2 percent, to settle at $99.36 a barrel. London's Brent oil closed down $1.71 at $107.56 after falling as low as $106.77 earlier, below its 300-day moving average.

Aside from the stronger dollar, oil was also pressured by the lower close in U.S. stocks as a much-anticipated year-end rally on Wall Street fizzled. The S&P 500 index for U.S. stocks erased gains for the year as investors shifted focus to what is expected to be a difficult start to 2012.

The spot price of gold, which tracks trades in bullion, fell 2 percent, declining for a third straight days. That has put the precious metal on track for its smallest yearly gain in three years.

Analysts said a bearish double-top technical pattern and gold's closing at its lowest level since July could send more bullion investors heading for the exit.

"When you get so many people who bought gold thinking it was a safe haven and now under water, that's the reason why it can come off more, perhaps on dollar strength," said Rick Bensignor, chief market strategist of Merlin Securities. "The dollar becomes the safe place, not the gold market.

Spot gold was down 2.4 percent at below $1,554 an ounce by 4:30 PM EST (2130 GMT). It earlier hit a low of $1,553.89, its lowest since Sept. 26.

Bensignor said gold's technical weekly charts showed the market breaching key support of a three-year rising trendline.

That, he said, could cause gold to fall to $1,425 an ounce based on an "equal legs down" pattern on technical charts, which measures the magnitude of bullion's drop from its record high at above $1,920 an ounce on Sept 6 to a low of $1,534 an ounce on Sept. 26.

Also weighing on sentiment was news the U.S. Mint has enough American Eagle gold and silver bullion coins to meet demand and does not expect to allocate them in early 2012.

Spot silver fell 5.7 percent to $27.03 an ounce, leading the decline in industrial commodities.

Silver is on track to end the year down 11 percent after a $3 drop in the last five sessions, reversing hefty gains in the past two years.

Benchmark copper on the London Metal Exchange closed down 2.4 percent at $7,465 a tonne, as worries about slowing growth in top metals consumer China added to the impact of the stronger dollar. ' Reuters

1 comment:

  1. Silver Gold Bull is a very trusted precious metals dealer. You will be provided with reasonable, up-to-minute prices and make sure your gold and silver arrives to your door discreetly and securely.