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COMMODITIES-Index lowest since June 2012; oil, gold fall on rising dollar

Friday, 1 Nov 2013 | 4:58 PM ET

* Better-than-expected U.S. data boosts dollar, hurts gold, oil Natgas falls on mild weather

* Commodities out of favor as investors pile into equities

NEW YORK, Nov 1 (Reuters) - A leading commodities index sank to its weakest since June 2012 on Friday as upbeat data bolstered the dollar and hurt oil and gold prices, while natural gas prices hurtled lower for a fifth straight session due to forecasts of mild weather. Gold fell about 1 percent on Friday, posting its biggest weekly loss in seven weeks, as better-than-expected manufacturing data renewed anxiety that the Federal Reserve could scale back its bond-buying stimulus for the U.S. economy. The Thomson Reuters/Core Commodity CRB index, closed down 1.04 percent to 274.9596, weighed by losses in 16 of the 19 commodities it tracks. That was its lowest reading since the end of June last year as the U.S. dollar has resurged on growing optimism about the recovery of the world's biggest economy. A stronger U.S. currency makes dollar-denominated assets such as gold more expensive for foreign investors. "A drop in the euro on the back of weaker inflation figures and very good U.S. data has strengthened the dollar, in turn weighing on gold," Natixis analyst Bernard Dahdah said. Investors have also piled into equities, seeing better returns there amid doubts about long-term demand from China, the world's No. 1 consumer of key commodities, and oversupplies of oil and copper. The euro fell for a fifth day against the dollar, heading for its biggest weekly loss in 16 months, on growing expectations the European Central Bank will ease monetary policy further to protect growth. On Friday, data showed U.S. factory output grew at its fastest pace in 2-1/2 years, beating economists' expectations.

While that fuels hopes for the U.S. economy, it also complicates investors' expectations for when the Federal Reserve may begin to trim its $85 billion in monthly bond purchases. Investors also digested mixed comments from top Fed officials. Richmond Fed President Jeffrey Lacker reiterated his view that the U.S. labor market has recovered enough in the last 14 months to allow the U.S. central bank to reduce its bond-buying stimulus. But St. Louis Federal Reserve Bank President James Bullard called for the Fed to wait for signs that U.S. inflation is heading higher before starting to scale back its massive bond-buying program. Elsewhere in commodities, arabica coffee and corn prices were hit by renewed selling amid concerns about oversupplies. Arabica sank to a four-and-a-half-year low before eking out small gains on the day on a flurry of short covering, while corn sank to its weakest in three years. Frozen orange juice and coffee were the only markets to close higher on Friday. On Thursday, S&P Dow Jones Indices LLC said its Dow Jones-UBS Commodity Index will increase its weightings for Brent crude, gold and silver next year, while cutting back on natural gas, U.S. crude oil futures and some base metals.

GOLD ON FED WATCH Gold was down 3 percent for the week, reversing two consecutive weekly gains. Any sign that the Fed will reduce its bond buying is likely to weigh heavily on gold. Funds and institutional investors have in recent years bought gold as a hedge against inflation and monetary actions by central banks. "Overall, investors have expected a reduction in monetary easing. So, even though there have been no changes effective this year, the market is selling off in anticipation of Fed tapering eventually," said Erica Rannestad, precious metals analyst at the CPM Group. U.S. Comex gold futures for December settled down $10.50 to $1,313.20 an ounce, with trading volume about 20 percent below its 30-day average, preliminary Reuters data showed. "I wouldn't be surprised to see a drop below $1,300 next week if there's more good data out of the U.S.," said Natixis' Dahdah.

OVERSUPPLY OFFSETS LIBYA OUTAGE Brent oil tumbled by nearly $3 a barrel and settled at its lowest point since early July, narrowing its premium to U.S. crude in heavy selling. Traders shrugged off Libya's oil supply outage and instead focused on a strong dollar and a supply overhang that set an overall bearish market tone. U.S. crude oil futures sank to the lowest since June, while Brent ended with its largest daily percentage loss also since June. Brent's steeper losses narrowed its premium over WTI by $1.16 from Thursday's close, after it hit a seven-month high of $13.60 in the previous session. Brent crude for December delivery settled down $2.93 at $105.91 a barrel, a loss of 2.7 percent, its largest daily percentage loss since June 20. The last time Brent settled lower was on July 4, at $105.54. U.S. oil for December fell $1.77 to settle at $94.61, posting a fourth straight week of losses and its longest losing streak since June 2012. It was the lowest settlement price for the U.S. contract since June 21 at $93.69. "We have weak fundamentals in the oil market, and once we broke $95 in U.S. crude, the whole complex came under pressure," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.

MILD WEATHER HURTS NAT GAS U.S. natural gas futures ended lower for a fifth straight session, pressured by forecasts for mild weather that should slow demand, the day after a weekly inventory report came in slightly above consensus estimates. The nearby contract, down 1.8 percent in the previous two weeks, finished the week down 5.2 percent as moderate forecasts through mid-November weighed on prices. It was the biggest weekly decline in two months. "Weather forecasts turned warmer this week, and there's no end in sight. And some private forecasts for November and December are also looking more bearish," said Steve Mosley at The SMC Report in Arkansas. Front-month gas futures on the New York Mercantile Exchange ended down 6.8 cents, or 1.9 percent, at $3.513 per million British thermal units, after trading between $3.508 and $3.578.

Prices at 4:43 p.m. EDT (2043 GMT)

LAST/ NET PCT YTD CLOSE CHG CHG CHG US crude 94.66 -1.72 -1.8% 3.1% Brent crude 106.11 -2.73 -2.5% -4.5% Natural gas 3.513 -0.068 -1.9% 4.8% US gold 1313.20 -10.50 -0.8% -21.6% Gold 1314.56 -8.63 -0.6% -21.5% US Copper 3.30 0.00 -0.1% -9.7% LME Copper 7245.00 -4.00 -0.1% -8.6% Dollar 80.711 0.516 0.6% 5.1% CRB 274.960 -2.903 -1.0% -6.8% US corn 427.25 -1.00 -0.2% -38.8% US soybeans 1266.00 -14.25 -1.1% -10.8% US wheat 667.75 0.25 0.0% -14.2% US Coffee 105.55 0.15 0.1% -26.6% US Cocoa 2651.00 -26.00 -1.0% 18.6% US Sugar 18.25 -0.07 -0.4% -6.5% US silver 21.837 21.618 1.6% -27.8% US platinum 1451.90 3.50 0.0% -5.6% US palladium 738.25 1.45 0.2% 5.0%

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