In commodity markets the price of oil was volatile: after hitting a low of $US37.65 a barrel on Tuesday, rallied to $US44.76 a barrel on Friday.
But gold failed to trade above $US1000 an ounce early in the week, then fell sharply so that by Thursday it was down around $US932.
But it was back above $US950 an ounce on Friday as shares fell, led by US financial stocks after the American government lifted its stake in struggling Citigroup to 36%.
Overall though, gold fell, capping the first weekly loss for three weeks, as the US dollar strengthened to the highest level since April 2006.
A week before gold had moved higher, despite a stronger US currency, but last week it was back to ‘normality, although gold’s rise from Thursday to Friday coincided with a rise in the value of the greenback.
Certainly the Japanese yen fell sharply against the US currency (and might be a big blessing for struggling Japanese exporters).
The greenback rose after the US Government bailed out Citigroup for a third time; the US Dollar Index was up against the currencies of six major trading partners on increased demand from the markets for the US dollar.
That index hit its highest level in three years Friday as well.
Illogically these same investors were looking for a safe haven in the same currency as that of Citi and the near-nationalising US Government. Surely they should have been looking for safety in a currency away from the US dollar?
It seems the fears over Citi’s further weakness was overtaken by more gloomy news from the global economy.
But US banks remain in trouble: two more were taken over and sold off on Friday by regulators: that’s 16 failures so far this year, against 25 in all of 2008.
Gold futures for April delivery fell 10c to $US942.50 an ounce on Comex in New York.
That left the metal down 6% for the week, the first decline since the start of last month and the biggest fall for three months.
That wasn’t a sign of nervy investors heading for a bolt hole, as some gold bugs insisted was the case on Friday.
The US dollar rose 1.7% last week in a rare opposite move this year to the gold price.
Bloomberg reported Friday Deutsche Bank as saying:
"The gold price will remain supported into the second quarter as fears towards world growth persist,” analysts at Deutsche Bank AG said today in a report.
"However, we remain concerned that the gold price rally is based on shaky foundations as it has not been accompanied by a weakening of the US dollar.”
Gold reached $US1,007.70 an ounce a week ago on Friday, the highest price for a most-active contract since March 18. Gold touched a record $US1,033.90 on March 17, 2008.
May silver futures rose 1% Friday to $US13.11 an ounce in New York. It fell 9.5% over the week, the first fall in six weeks.
The SPDR Gold Trust, the largest physically backed ETF, reported a modest increase in its gold holdings on Thursday.
Analysts reckon the way these funds have grown in recent weeks, boosted by investors looking for an easy way to ride the gold price, has left the metal over-bought and looking for a fall.
India, the world’s largest gold jewellery market, appears not to have imported any gold last month, compared with imports of 23 metric tonnes in the same month of 2008.
The Indian rupee has fallen to a record low against the dollar, pushing local gold prices even higher for domestic Indian jewellery makers. (Just as the fall in the value of the Australian dollar, has pushed our domestic prices to record levels.)
Meanwhile oil fell for the first time in four days on concern demand will fall after the US economy contracted faster than anticipated in the 4th quarter.
Not helping was news in the Financial Times of a quiet official problem of an Exchange Traded Fund (ETF) that has amassed a very large position in a current Nymex oil contract in New York, a move that may have helped produce last week’s big swings in the price.
The FT reported that the probe is into the EFT that has grabbed 20% of the crude oil contract traded in New York and London.
"The Commodity Futures Trade Commission is investigating the United States Oil Fund, an exchange-traded fund listed in New York, after its size surged in the past three months to 95,000 lots on the West Texas Intermediate contract for immediate delivery.
"It is unclear what action the regulator will take, if any, and officials familiar with the matter said the investigation was in the preliminary stages. The CFTC has emergency powers to force the fund to reduce sharply its position at Nymex to 10,000 contracts.
"The CFTC is hesitant to take such drastic action amid worries that it would drive the fund into foreign exchanges outside its control, according to people familiar with the matter.
"The USO fund has shifted a proportion of its oil futures from Nymex into ICE Europe in London, which is regulated by the UK’s Financial Services Authority.
"The CFTC, which is in talks with the FSA, is considering asking the UK regulator for its support in any move related to the size of the fund’s positions, people familiar with the matter told the Financial Times."
On the face of it the big swings seen in the past 10 days have revolved around the weekly updates on stocks of oil and oil products in the US, but seeing the US is in severe recession and falling stock levels are to be expected, the price movements have raised some eyebrows.
Oil rose more than 7% in February and Thursday’s settlement price of $45.22 was the highest since Janu
