By Chris Flood
Published: November 16 2009 11:50 | Last updated: November 16 2009 11:50
Gold charged to a new peak on Monday, leading a broad advance across commodity markets with crude oil prices rising by $1 a barrel and base metals moving higher as fresh dollar weakness bolstered sentiment towards commodities.
Gold hit a record $1,132.95 a troy ounce after ending Friday’s session in New York at $1,118.80.
EDITOR’S CHOICE
Q&A: Gold’s record run - Nov-11
Peak gold? - Nov-12
Asian rebound sparks revival in oil demand - Nov-12
Q&A: Fatih Birol of the IEA on energy forecasts - Nov-11
Bank moves spur the gold rush - Nov-06
Editorial: Bullion quest is no golden opportunity - Nov-06
Bets on gold prices rising further by hedge funds remain close to record levels with the latest data from the Commodity Futures Trading Commission showing the speculative net long position dipping to 238,060 lots in the week ending November 9 from 241,319 lots in the previous week.
Crude oil prices rallied with Nymex December West Texas Intermediate up $1 to $77.35 a barrel while ICE January Brent added 99 cents to $77.30 a barrel.
Olivier Jakob, head of Swiss-based oil consultancy Petromatrix, said global markets were seeing a continuation of risk appetite but this was largely sponsored by continued pressure on the dollar.
“As long as the dollar bashing continues, there will be some support coming to commodities and to oil, but the risk concentration on the (short) dollar trade is increasing by the day as fundamentals do not provide enough support,” said Mr Jakob.
Technical analysts said WTI remained rangebound between a high of $80 a barrel and a low of $75.
“As long as the dollar can still be pushed lower, traders will be hesitant to hold short positions below $75but as long as the statistics are not showing any signs of improving demand, it will likewise be difficult to hold long positions above $80,” said Petromatrix.
WTI December options are due to expire on Tuesday but traders said the spot price was too far from the large concentrations of $85 calls (right to buy) or $70 puts (right to sell) for these to act as a significant gravitational pull on the futures market.
Among the base metals, copper rose 2 per ent to $6,678 a tonne while aluminium added 1 per cent at $1,972 a tonne.
Michael Widmer, metals strategist at BofA Merrill Lynch Global Research, said that a strengthening in demand outside China was “essential” to tighten the balance between supply and demand in base metals markets.
“We believe there is scope for this to happen,” said Mr Widmer: “A confirmation of the economic recovery could provide an incentive for metal market consumers to restart capacities or even restock. Although we anticipate positive metal demand growth next year, we nevertheless believe any increases will emerge only gradually.”
Mr Widmer is forecasting that copper will average $7,125 a tonne next year and $8,000 a tonne in 2011.
