On the face of it commodities should have ended last week with a bang – the weak US March jobs report, worries about President Trump and then the uncertainty in the wake of the surprise American attack on Syria were all factors that should have seen a weak dollar, weak equities and higher safe haven assets – and a dip in bond yields in Japan and the US.
That should have sent gold and oil racing higher as worried investors look for those safe havens. And while we saw a bit of that for a few hours, by the close it was the impact of a stronger US dollar that had the greater impact on the day.
Worried investors tended to buy US dollar denominated financial assets, not commodities in the wake of the missile launchings against Syria. While bond yields (for the US 10-year note) hit a day’s low around 2.28%, by the close early Saturday that had risen to 2.38% as the impact of the Syrian bombing wore off.
Gold prices had a similar experience – hitting their highest level since Donald Trump’s election in the wake of the US air strikes against the Assad regime and the weak US jobs growth for March, then fading in later trading.
The futures price on Comex for hit $US1267.90 – the most highest level since November 10 and its best gain in three weeks. Prices jumped when news of the US’s military strikes against the Syrian government emerged in Asian trading time early Friday.
Other haven assets which usually outperform at times of political stress – such as oil and the Japanese yen – have also climbed, but could not sustain the early momentum.
While Comex gold futures on Friday finished higher, they were well off the higher levels for the session, thanks to the strength in the US dollar and a rebound in equities.
June gold closed $US4, or 0.3%, up at $US1,257.30 an ounce.
For the week, gold closed up 0.2% and had its fourth straight weekly advance.
But the metal failed to end above its 200-day moving average of $1,261.10 an ounce, according to FactSet data. Moving averages help to determine trends in an asset.
In other metals, copper for May delivery fell 0.4% to $US2.65 cents a pound, for a 0.2% weekly gain. The Financial Times reported that despite the attack on the Syrian airbase, it will be the gradual tightening in US monetary policy this year is likely to keep a lid on gold prices, according to Thomas Pugh, commodities economist at Capital Economics.” (That’s what UBS said the day before as well).
“The price of gold is likely to fall from about $1,265 today to $1,050 by the end of the year” said Mr Pugh, according to a report in the FT.
Meanwhile oil futures ended at a one-month high Friday after the airstrike on Syria, though gains were capped by expectations that any risk to Middle East output would be limited.
Crude even held onto its some of its earlier rise after data from oil-field services firm Baker Hughes showed US producers added 10 oil rigs this week, bringing the total number to 672 – 90% above where the figure stood a year ago.
US West Texas Intermedia crude futures for May settled at $US2.24 a barrel, up 54 cents, or 1.04%. Oil had jumped 2.4% in electronic trade following the strikes in Asian time. For the week, US crude was up 3.2%.
In London, June Brent crude rose 35 cents, or 0.6%, to close at $US55.24 a barrel after briefly dipping into negative territory after the weak US jobs report. Brent rose 3.2% for the week.
US crude oil production is now a touch under 9.2 million barrels a day and still rising. Stocks could reach 540 million barrels in the next week or so which would be yet another high.
