Gold had a great week and oil had a great Friday as the US dollar fell and markets quivered and then recovered their poise for a day, at least.
Friday’s surge in Europe and the US has at least steadied the ship ahead of what could be another volatile week.
Oil surged more than 10% on Friday – its biggest one day rise in seven years – on odd reports of possible OPEC production cuts or discussions, but the surge couldn’t offset another losing week for the commodity, unlike gold. Gold jumped 7% to $US1,239.40 an ounce last week – its biggest weekly gain since October 2011. That’s despite the small fall on Friday of 0.7%.
Last week’s surge took gold’s gains so far in 2016 to nearly 17% this year while stock markets have fallen sharply – many into bear territory outside Wall Street.
The US dollar fell 1% against a basket of six major currencies, while the Aussie dollar ended up above 71 US cents on Saturday morning for another solid week.
The volatility last week reduced investors’ risk appetite (but not for the Aussie dollar) and sent them flocking to safe haven assets like bonds in government bonds in the US. Germany, the UK and Japan, as well as gold (but not silver which actually went nowhere and trailed a long way behind gold).
Expectations for any US interest rate rise this year has waned and the weaker US dollar makes it cheaper for foreign buyers of assets such as gold. The spread of negative interest rate regimes in Japan and Europe, with fears of more to come, has added to the attractions of holding gold instead of paying banks to hold cash.
Meanwhile, West Texas Intermediate crude futures in New York rose 12% on Friday after settling at the lowest since May 2003 on Thursday at $US26.21 a barrel.
But after those reports of that some Middle East OPEC members were talking about holding production, West Texas Intermediate oil for March delivery surge $US3.23 to settle at $US29.44 a barrel in New York, the biggest increase since February 2009 (when markets were emerging from the GFC).
The reports came out of the UAE which is not a big producer and were contrary to what the likes of Iran want to see – no production ceilings.
It would seem all the talk leaked to complacent western media (Sky News in London!) failed to mention the self-interest in talk of production ceilings (Venezuela is another OPEC straggler who wants this) by minor members of OPEC who would be hit hard by higher production and sales of oil from Iran.
In London, Brent for April settlement gained $US3.17, or 11%, to $US33.23 a barrel.
But West Texas crude still suffered a weekly loss of 4.7% on the back of the market’s ongoing supply glut, while Brent crude futures ended down 2.9%.
Comex March silver ended at $US15.79 an ounce, down less than half a cent for the session. For the week, it climbed nearly 6.9%.
In other metals on Comex, copper for March delivery rose 2.3 cents, or 1.1%, to $US2.029 a pound on Friday but it still lost 3.5% on the week – a more accurate reflection of the realities of commodity markets at the moment.
