LONDON, United Kingdom – Commodities were gripped this week by the threat of military strikes in Syria, with New York oil hitting a two-year high on fears of a wider conflict, analysts said.
Gold jumped to multi-month peaks, as many investors parked their cash in the precious metal that is widely regarded as a safe haven in times of geopolitical turmoil.
“Commodity prices have been in sharp focus this week as the debate over Western intervention in Syria intensifies,” said CMC Markets analyst Matt Basi on Friday, August 30.
“Speculation that a strike was imminent sent oil soaring higher earlier in the week as concerns rose over increased instability in the region, but prices have cooled in the past 48 hours as political opposition to intervention rises.
“Investors have generally shunned equity markets and flocked to the perceived safe haven of gold, though the yellow metal has dipped back beneath $1,400 per ounce going into the weekly close as Friday profit-taking comes into play,” said Basi.
OIL: The market surged on Wednesday, August 28, in anticipation of Western military strikes on Syria, with New York crude striking $112.24 per barrel, which was the highest level since early May 2011.
Brent oil soared to $117.34 a barrel, last seen in late February.
Prices then fell back on Thursday and Friday as prospects receded for an imminent strike against Syria over its alleged use of chemical weapons.
“Oil prices continue to be under the spell of the Syrian crisis,” said Commerzbank analyst Carsten Fritsch.
Although Syria is not a major oil producer, traders are nervous about a broader conflict in the crude-rich Middle East region, including neighbouring Iraq, which is becoming a major exporter.
US plans to build an international coalition for a “limited” strike on Syria suffered a blow when British lawmakers on Thursday voted against the use of force.
The White House signalled however that President Barack Obama would take unilateral action if necessary.
“After the House of Commons in the UK failed initially to approve Britain’s participation in a military strike against Syria, the pendulum is now swinging back in the direction of declining risks,” Fritsch added.
“Even if this does not imply by any means that military action is out of the question, a limited unilateral campaign by the US would probably have far fewer consequences for the oil market than a major international offensive. Oil prices therefore came under massive pressure.”
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in October advanced to $114.74 a barrel compared with $111.06 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for September increased to $108.02 per barrel, from $106.20.
PRECIOUS METALS: Gold leapt on Wednesday to $1,433.83 per ounce — the highest level since May 14 — as investors flocked to the precious metal.
Sister metal silver touched $25.10 an ounce, attaining a level last seen in mid-April.
Platinum also struck the highest point since April, at $1,555 per ounce, boosted by strikes in key producer South Africa.
“The prospect of Western military intervention in Syria has really weighed on risk appetite this week, with investors pulling their money out of risky positions such as equities, particularly in the emerging markets, and instead opting for safe haven assets, including Gold and US Treasuries,” said Apari analyst Craig Erlam.
“Gold has re-emerged over the last few weeks as the preferred safe haven asset for investors,” he added.
By late Friday on the London Bullion Market, the price of gold rallied to $1,394.75 an ounce from $1,377.50 a week earlier.
Silver climbed to $23.64 an ounce from $23.06.
On the London Platinum and Palladium Market, platinum eased to $1,527 an ounce from $1,538.
Palladium declined to $741 an ounce from $752.
BASE METALS: Base or industrial metals mostly fell in line with global stock markets.
“Metal prices have come under pressure from the pull of falling equity markets, growing geopolitical risks and a firmer US dollar,” said Commerzbank analysts.
“We believe there is little fundamental justification for the weak prices and feel instead that they need to catch up with other economic indicators such as equities.
“The current recovery of the Chinese economy in particular is likely to help drive prices up.”
By Friday on the London Metal Exchange, copper for delivery in three months slid to $7,111.75 a tonne from $7,335 a week earlier.
Three-month aluminium slipped to $1,820 a tonne from $1,885.
Three-month lead fell to $2,162 a tonne from $2,214.
Three-month tin eased to $21,150 a tonne from $21,919.
Three-month nickel dropped to $13,864 a tonne from $14,525.
Three-month zinc slid to $1,905.25 a tonne from $1,971.
COCOA: Cocoa futures edged higher as traders paused for breath, one week after striking multi-month peaks on worries over output from top producer Ivory Coast.
By Friday on LIFFE, London’s futures exchange, cocoa for delivery in December rose to £1,639 a tonne from £1,628 a week earlier.
On New York’s NYBOT-ICE exchange, cocoa for December firmed to $2,468 a tonne compared with $2,461 a week earlier.
COFFEE: Robusta prices sank to $1,752 per tonne, which was the lowest level in two months, as the market was hit by the prospect of abundant supplies.
By Friday on NYBOT-ICE, Arabica for delivery in December rose to 117.45 US cents a pound from 116.90 cents a week earlier.
On LIFFE, Robusta for November dipped to $1,757 a tonne from $1,781.
SUGAR: The sugar market experienced mixed fortunes.
By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in October increased to 16.36 US cents a pound from 16.34 cents a week earlier.
On LIFFE, the price of a tonne of white sugar for October reversed to $474.50 from $482.90.
RUBBER: Prices posted modest gains on hopes that a recovery in China’s economy would fuel demand, traders said.
The Malaysian Rubber Board’s benchmark SMR20 rose to 241.85 US cents a kilo from 240.00 cents the previous week. – Rappler.com