Gold down (and down hard), oil up (more in relief) as the US dollar rose and rose.
Normally a stronger US dollar is a big negative for commodities – it was for gold copper and silver, but not oil last week as traders continued to listen to any story pitching a production cap agreement from OPEC on November 30.
But for gold, the rising greenback was bad. When it is paired with the growing belief of a rate rise in the US next month, the negativity is compounded.
So Comex gold futures slid on Friday to their lowest finish since February in New York.
Federal Reserve Chair Janet Yellen helped set up the tumble with her comments on Thursday that a US rate hike could come “relatively soon.”
Her comments to a joint committee of the US Congress came on the heels of strong economic data, which further backs the likelihood of a rate increase.
Gold futures for December delivery fell $US8.20, or 0.7%, to settle at $1,208.70 an ounce, ending about 1.3% lower for the week. The settlement was the lowest since mid-February, according to data group, FactSet.
And the strength of the dollar impacted other metals. Comex December copper fell 2.9 cents, or 0.9%, to $US2.468 a pound, down about 1.6% lower for the week, while Comex December silver fell 14.8 cents, or 0.9%, to $US16.624 an ounce, for a weekly slide of around 4.4%.
But oil futures prices settled higher on Friday, closing out a strong week that saw crude buoyed by growing expectations that OPEC will find a way to cap output.
For the week, Brent and US crude both rose roughly 5%, their first weekly gains in about a month.
Investors ignored tow big negatives for oil – another rising US stocks and more rigs drilling for oil. Stocks rose by 5.3 million barrels to more than 490 million, while US domestic production fell by 11,000 barrels a day.
In fact oil services company Baker Hughes said US drilling rigs rose by 19 to 471 in the week to November 18.
That was the 22nd weekly rise in the past six and a bit months and the most rigs added in a single week for 16 months. Normally that would be a big negative, but it was ignored.
Gains were limited by the stronger dollar, which reached its highest levels against a basket of currencies since 2003 after U.S. Federal Reserve Chair Janet Yellen said on Thursday a rate increase could happen “relatively soon."
Traders remain positive that OPEC is moving closer to finalising its first deal since 2008 to limit output, with most members prepared to offer Iran flexibility on production volumes.
Iran has been the main stumbling block for capping production. While it has not yet responded to the proposal, the flexibility shown by others suggests OPEC members may be coming nearer to consensus as the November 30 meeting approaches.
Brent notched a daily rise of 37 cents, or 0.8%, to $US46.86 per barrel. Brent also had its first weekly increase in five weeks – up 4.7%
US West Texas Intermediate crude was up 27 cents, or 0.6%, for the day, at $US45.69 a barrel. It posted its first weekly increase in four – a rise of 5.3%.
