Friday’s weak US jobs report for August naturally saw renewed interest in gold, helped weaken the value of the US dollar and sparked delight among many investors that the free money from the Fed and other central banks will continue for a while longer.
Oil prices eased on Friday as the clean up after Hurricane Ida across the Gulf Coast and Gulf of Mexico producing facilities but the slide in iron ore prices eased, while wheat and sugar prices closed out another solid week.
Driving much of the activity in commodities was weaker-than-expected economic data around the globe much of which was due to the continuing impact of Covid Delta infections which is slowing activity in China, Malaysia, Vietnam, Taiwan, Thailand and the Philippines.
The rising problems of Covid Delta in these countries continues to strangle the world’s auto industry – all American car plants will be closed or running at lower capacity this month as a result, while Toyota plants, from Japan to Thailand will be shut or slowing for all of September.
The slide in US non-farm new jobs growth to just 235,000 as weaker than forecasts around 730,000 and the smallest increase in 7 months.
The weaker outcome was caused by the continuing spectre of Covid Delta across much of the US, especially in southern states like Texas, Florida and in the Midwest in Idaho, while the aftermath of Hurricane Ida will have a significant one-off impact on production in energy, exports, grain harvests and building and construction.
As well last week we saw further confirmation of the weakness in the Chinese economy on Friday on top of Tuesday and Wednesday’s weak data.
The Caixin services activity survey for August slumped 8.2 to 46.7, much weaker than expectations of 52.0 and the steepest pace of contraction in 16 months.
It was a sharper slump than that in manufacturing and services in the official survey earlier in the week and was driven by the series of Covid outbreaks, bad flooding and weaker consumer demand.
Coming after the official survey of Chinese manufacturing activity showed the first contraction since the first quarter of 2020, the Caixin services survey confirmed the world’s second largest economy is floundering.
Trade data for August tomorrow and the inflation and producer price figures later this week will be closely watched to see if the imact is having a bigger impact than we saw last week.
In addition, Eurozone July retail sales unexpectedly fell 2.3% from June, weaker than expectations for a steady outcome. Australians retail sales for July were confirmed as falling 2.7% on Friday as well.
Front Month Comex gold for September delivery rose $US14.30 an ounce, or 0.8% to $US1830.90 last week, all thanks to the 1.3% jump on Friday in the wake of the weak jobs data.
While that left the metal up for the week, it is still down 3.3% year to date.
Comex silver rose and did copper prices. Silver was up 2.9% at $US24.762 an ounce while copper edged up 0.16% over the week to finish at just over $US432 a pound.
Copper traders hesitated to take it any further after the start of month reports on manufacturing and services showed the economy in a mild state of contraction in August.
Oil fell on Friday as it became clear that the Gulf of Mexico production and processing facilities had not been badly damaged by Ida.
In reality, the more serious damage – especially for insurers — was in four states centred on New York City with billions of dollars of damage caused.
The weekly survey of rig use across the US from services company, Baker Hughes showed a big fall of 16 (to 394) in the number of oil rigs in use last week and a fall of 11 overall in total rigs in use (to 497). The falls were due to the impact of Hurricane Ida.
OPEC crude output crude production rose 290,000 barrels per day (bpd) to 27.11 million bpd a 16-month high but the amount of oil stored on tankers around the world edged up 93.65 million barrels.
Sugar prices jumped to four-year highs around 19.90 US cents a pound on Thursday before easing back to 19.62 US cents at Friday’s close in New York.
The trigger was frosts in Brazil (which is in the midst of the worse drought in 90 years) which cut the size of the cane crop in the world’s biggest producer.
Wheat futures rallied amid bets that Russian harvests will fall short of (optimistic) global export demand and closed around $US7.27 a bushel in Chicago, down 0.7% for the week, but up from the week’s lows of $US7.05 a bushel on Thursday.
And iron ore prices steadied on Friday – the price of 62% Fe fines from the Pilbara rose $US2.69 to $US157.55 a tonne. That was down $US12.84 a tonne or 8.1%.
Meanwhile LME aluminium prices hit a series of 10-year highs over last week on news that Chinese capacity had been cut at an increasing rate because of power shortages and the central government’s drive to cut carbon emissions.
Several Chinese regions – including the smelting hubs of Yunnan, Xinjiang and Inner Mongolia – have imposed restrictions on aluminium makers’ electricity consumption or metal production in recent months because of tight power supplies and pressure to reduce emissions.
Analysts estimate the cuts at around 2.2 million tonnes on an annual basis or around 6% of China’s annual capacity of almost 40 million tonnes.
That saw aluminium prices on the Shanghai Futures Exchange hit a 13-year last week on fears of tight supply, while LME Asian reference price hit a fresh decade peak above $US2,728 a tonne on Friday.
And premium hard coking coal prices continued around record levels of nearly $US442 a tonne (including cartage and freight) and thermal coal strengthened towards $US180 a tonne (according to the Newcastle coal Index run by ICE (the Intercontinental Commodity Exchange).
The free on board (fob) price of Australian premium hard coking coal was around $US270 a tonne ex-China.
