Oil, Gold Prices Jump
(08-24) 13:56 PDT NEW YORK, (AP) —
Major commodities markets moved higher Friday, with energy and metals prices supported by newly positive data on home sales and factory orders.
Oil prices jumped above $70 a barrel. Gold prices rose solidly, underpinned by a weaker U.S. dollar, while agriculture futures finished in mixed range.
Investor sentiment in the commodities markets has been hesitant in recent weeks, as tighter credit conditions have emerged and tempered expectations about economic growth. But stronger-than-expected economic reports Friday bolstered commodity prices, as did the return of an air of calm on Wall Street. Stocks logged strong gains on Friday, capping a week that saw much less volatile trading compared with the past month.
The Commerce Department reported a big jump in orders for expensive goods and an increase in home sales in July Д evidence that the housing market slump and problems in the credit market haven’t reached manufacturers. Factories saw orders for big-ticket “durable” goods rise 5.9 percent in July, the most in 10 months. Meanwhile, sales of new homes increased 2.8 percent in July, bucking economists’ consensus forecast for a decline.
Despite the slight gain, home sales are still down more than 10 percent from a year ago.
Copper prices rose on the London Metal Exchange and gained 7.35 cents to settle at $3.35 a pound on the New York Mercantile Exchange. BNP Paribas analyst David Thurtell noted that “copper prices have been positively correlated with the economy since the beginning of this year,” and the market on Friday got a boost from the surprisingly bullish U.S. data.
Other industrial metals prices ended mixed on the London Metal Exchange, with tin, zinc and nickel down while lead and aluminum rose. Lead jumped 3.5 percent, supported by declining inventory levels. Stockpiles of lead held by the LME decreased every day this week; exchange inventories are viewed as a barometer of global supply.
Meanwhile, gold prices rose solidly Friday as the U.S. dollar lost ground against the euro and other major currencies. Precious metals prices had been mostly on the decline since late July as problems in the credit market Д linked to the rising defaults on subprime mortgages and the devaluation of those assets that has followed Д have increased.
There are two main forces battling one another that could affect the gold market, said Axel Merk, president of Merk Hard Currency Fund. One is the global theme of contracting credit Д a negative for the precious metals market. The other is that the Federal Reserve doesn’t want to let the credit market shrink up.
“The folks who buy precious metals believe the Fed will do anything in its power to get the economy growing and stop a recession,” he said.
A cut in the benchmark federal funds rate, which Wall Street is hoping for, could stir up additional liquidity even as it would undermine the U.S. dollar Д two potential buttresses for gold. The Fed is scheduled to meet Sept. 18 to set interest rates.
December gold picked up $9.10 to $677.50 an ounce at the close of the Nymex. December silver rose 30 cents to $12.098 an ounce.
Elsewhere on the Nymex, energy prices climbed, helped by Wall Street’s positive finish on Friday and the day’s upbeat economic data. JPMorgan analysts said in a report Friday “this week’s stability in the equity market quelled concerns over subprime-mortgage slowing the global economy and cutting energy demand.”
Oil and gasoline prices also jumped on reports that Chevron Corp. had declared force majeure on purchases of some crude oil for a Pascagoula, Miss., refinery that suffered a fire last week. Chevron did not return calls requesting comment. The 330,000-barrel-a-day Pascagoula refinery has been running at partial capacity since the fire.
Force majeure protects a company from contractual liability in the face of natural or unexpected disasters.
Light, sweet crude for October delivery jumped $1.26 cents to settle at $71.09 a barrel, while September gasoline futures added 5.82 cents to $1.9814 a gallon.
In Chicago, wheat futures built on the sharp gains of the past week.
The December wheat contract rose 8 percent this week and tallied all-time record highs amid robust demand for U.S. wheat from foreign buyers. On Friday, futures picked up another 3 cents to close at $7.42 a bushel on the Chicago Board of Trade, as more evidence of strong export demand emerged: The U.S. Department of Agriculture on Friday reported Cuba purchased 100,000 metric tons of hard, red winter wheat.
December corn slipped 3.25 cents to close at $3.5875 a bushel, while November soybeans rose 6.75 cents to $8.65 a bushel.
