Commodities slip on US policy, China concerns
London, June 24, 2013
Gold and copper prices fell on Monday and oil prices languished as the prospect of slower growth in China and the US central bank's plans to rein in monetary stimulus worried investors.
Brent crude oil prices slipped below $100 a barrel to their lowest in three weeks, copper hit a near three-year low and gold fell more than 1 percent as investors turned to the safe haven of the US dollar.
The US Federal Reserve has signalled it might rein in its quantitative easing policy while comments from the Chinese central bank have stoked fears it could keep money tight, slowing growth.
The United States and China are the world's top two economies and biggest consumers of crude oil and copper so prices suffer if it looks as though demand will slow. Gold is vulnerable to the prospect of rising interest rates.
"There are two major focus points in the market at present -- the Fed reducing QE early, and uncertainties about what the latest spike in short term Chinese interest rates can lead to," Saxo Bank vice president Ole Hansen said.
"Both crude oils (are) stuck in ranges, with an expected pick-up in demand over the coming quarter together with geo-political worries supporting, while Fed and China pulls the other way," he said. "Gold price action looks horrible."
Waning appetite for higher risk assets prompted a drop in European stock markets after Asian shares slid to 9-1/2 month lows overnight, while the dollar index climbed. The Euro STOXX 50 Volatility index hit a four-month high, signalling a sharp rise in risk aversion.
Spot gold was down 1 percent at $1,281.84 an ounce at 1032 GMT, taking its losses for the year to 23 percent, as fresh strength in the dollar added to pressure exerted by talk of an end to ultra-loose U.S. monetary policy.
The Fed gave the clearest signal yet late on Wednesday that it was considering reining in its quantitative easing. The policy has benefited bullion in recent years by keeping interest rates at rock bottom and stoking inflation fears, and was a key factor sending gold prices to record highs in September 2011.
CHINESE GROWTH IN FOCUS
China's central bank meanwhile fuelled concerns it could keep money tight, sparking a slowdown in growth, on Monday after it said liquidity in its financial system is at a "reasonable" level. That came after interest rates for short-term funds in China spiked last week.
Brent crude oil dropped to a low of $99.82 a barrel on Monday and was later flat at $100.94. U.S. oil was little changed at $93.62 a barrel.
"Given the grave concerns about the Chinese economy oil bulls are running for the exit," oil broker PVM said in a note. "This week has not started in an upbeat mood and the chances of further misery are a real possibility unless the Chinese central bank quickly intervenes."
Three-month copper on the London Metal Exchange fell to its lowest since July 2010 at $6,613 a tonne, and was later down 2.4 percent at $6,656. The metal lost nearly 4 percent last week in its biggest weekly loss since mid-April.
Wheat prices eased and Chicago corn slid to a near one-week low on Monday while soybeans dropped to the lowest since late May, weighed down by near-perfect growing conditions across the U.S. grain belt.
Chicago Board of Trade new-crop December corn fell as low as $5.44-1/4 a bushel, the lowest since June 18. July wheat eased 0.9 percent to $6.91-3/4 a bushel after climbing to its highest since June 5 last week.
November soybeans eased 0.9 percent to $12.61-1/2 a bushel, having earlier hit their lowest since May 28.
Coffee and sugar rose and cocoa prices held steady, consolidating after last week's sharp declines. July raw sugar on ICE was up 25 cents at 16.99 cents per lb.
September arabica coffee futures on ICE were up 0.5 percent at $1.1985 per lb, while September cocoa futures were flat at $2,151 a tonne. - Reuters