On the whole, Wednesday was another miserable day for commodities, especially oil.
Oil prices were hammered in global markets, dropping to yet another round of 18-year lows, gold, copper, and silver slid, but iron ore edged higher for yet another day.
Despite yesterday’s run-up in local gold stocks on Wednesday, the fall overnight will see them lower today, while oil stocks face another day of selling.
Yesterday was another rough session for oil stocks. Oil search slashed spending and investment by at least 40% yesterday (See separate story) but that had no positive impact on the share price which fell7.9%. Woodside shares were down 8.8%, Beach shares lost 7.5% and Santos was whacked by more than 12%.
The drivers of the slump were once again fears about the impact COVID-19 will have on world economic growth and the demand for oil and gas and the still continuing (and silly) price/volume war between Saudi Arabia and Russia which is exacerbating the negative impact of the virus.
“This is unprecedented, and when we add in the OPEC increase in output we have a greater surplus of production relative to consumption greater than anytime in history,” said James Williams, energy economist at WTRG Economics.
“Unless OPEC backs off, prices should reach $20 [and] could go even lower. The low price will not result in increased demand until the world economies begin to recover, Marketwatch.com reported this morning”
West Texas Intermediate crude for April delivery plunged a massive $US6.58, or more than 24%, to settle at $US20.37 a barrel in New York, the lowest settlement since February 20, 2002.
In Europe, May Brent crude futures dropped $3.85, or over 13%, to settle at $US24.88, with prices ending at their lowest since May 8, 2003.
Comex gold futures meanwhile also lost ground, falling to their lowest settlement since December, as investors old the metal (and silver and copper) to raise liquidity to either hoard or pay off other debts.
Its why equity and bonds are being sold off – the losses huge as investors worry over the economic impact of the COVID-19 pandemic.
Wednesday saw local producers gain as the Australian dollar fell- Newcrest rose 1.6%, St Barbara a bigger 8.9%, Evolution shares were up 8.8% and Northern Star added 7.8%. Those rises will be hard to find today after the big crunch on Comex Wedneday.
The market has seen “more panic selling in any liquid asset,” said Jeff Wright, executive vice president of GoldMining Inc. U.S. Treasury Secretary Steven Mnuchin’s warning of the possibility of 20% unemployment without stimulus was likely “the tipping point towards lower levels across every asset class I can see,” he told Marketwatch.com.
“Gold could bounce back towards $1,550ish, but still think we are in range of $1,500-$1,600 in near term,” he told MarketWatch. “Long term, gold has to go higher once panic subsides and new normal takes over.”
Gold for April delivery on Comex fell $US47.90, or 3.1%, to settle at $US1,477.90 an ounce, their lowest settlement since December, according to FactSet data.
Comex May silver dropped 72.3 cents, or 5.8%, to $US11.772 an ounce after finishing Monday at its lowest since late January 2009.
Comex May copper lost 7% to $US2.151 a pound.
And iron ore prices edged higher with a small gain for the key indicator product, 62% fe fines delivered to northern China. It rose 51 cents to $US91.78 to continue the small gains in the midst of all the market carnage.
