Gold and oil rose Friday on the US second quarter economic growth figures.
Traders took the headline story of a better than forecast outcome: GDP was down an annual 1% for the quarter instead of the forecast 1.5%, but they neglected the underlying movers.
US government spending and the bigger than expected fall in imports kept growth stronger than it should have been after a surprise fall in consumer spending.
Oil jumped $US2.51 to settle at $69.45 a barrel on the New York Mercantile Exchange (NYMEX) and gold futures jumped $US18.50 to $US955.80 an ounce.
A weaker US dollar helped drive commodity prices higher, although there’s growing suspicion of attempts in the US to limit speculative positions in oil in particular.
The greenback fell against the euro and the yen.
The Aussie dollar jumped to 83.60 US cents on Saturday morning, close to its most recent highs.
So it was no wonder that gold and oil were strong off the back of the headline figures on US economic growth.
Gold had its biggest day’s rise since April 20 and Friday’s near 2% rise reversed earlier losses and took the gain for the week to 0.3%.
For July gold was up 3.1%, and Friday’s close was the highest since June 11.
Spot gold in New York rose 2.1% to $US954.05, after falling in early trading.
Comex silver futures for September delivery rose 45.5 cents, or 3.4%, to $US13.94 an ounce. It rose half a per cent last week and 2.5% for the month.
Oil prices climbed 3.7% in New York and the September futures settlement price of $US69.45, was the highest settlement price since June 30.
Prices rose 2.1% over the week.
But it lost just under 1% for July which was the first down month since January. Prices are still up 56% for the year.
US daily fuel demand averaged 18.7 million barrels in the four weeks to last week, down 4.4% from a year earlier.
But the US Energy Department report showed that petrol consumption averaged 9.2 million barrels a day over the period, up 0.8% from a year earlier.
That was seen as a small positive, and an indication Americans are driving a bit more this year with oil prices still $US80 a barrel lower than they were in July of 2008.
And more solid news for the iron ore trade.
Spot market iron ore prices have topped $US100 a tonne for ore bound for China.
According to the latest edition of the Metal Bulletin, the Indian cash price for China bound ore rose 5.8% last week to $US100.50 (including freight).
That was the highest level since last October and takes the rise this year to around 30%.
China’s 4 trillion yuan ($US585 billion) stimulus program is powering demand, although there are claims that China now has enough ore (and other metals) stockpiled to meet demand.
China lifted crude steel production to a record 266.6 million tonnes in the first half of this year, with iron ore prices up 29%.
And with BHP and Rio Tinto reporting improving demand from non-China areas, it’s interesting to read that US steel producers put prices up in July for the first time in a year and managed to make them stick.
Both Nucor and US Steel, the two major producers, reported last week that were seeing early signs of better demand approaching.
Bloomberg reported at the weekend that US steel prices rose 13% in July, the first gain in a year, after distributors began restocking their inventories.
"The average price of hot-rolled steel sheet, the benchmark product used in cars and appliances, increased to $US430 a tonne from $US380 in June," Purchasing magazine said today in a monthly update.
Cold-rolled steel rose 11% to $US517 a tonne.
“The falloff in steel consumption has likely reached a trough for the current business cycle and should start to recover gradually — albeit from very low levels — in the second half,” the magazine said
“Improvement is coming from restocking by the service centers of severely depleted inventories and not bookings for end-use manufacturing.”
"US Steel’s orders for flat-rolled steel have improved since bottoming in April and May, and mill operating rates may exceed 50 percent in the current quarter, up from 32 percent in the prior period,
And China’s Iron and Steel industry group now says that crude steel output for all of this year will top 500 million tones for the second time ever.
The 266.58 million tonnes of crude steel produced in the first half was up 1.23% over the same period last year.
That was an annual rate of over 500 million tonnes and Xinhua newsagency reported that the Association believes this rate will be sustained for the rest of the year.
