Gold shines but base metals are tarnished

Gold prices reached a fresh all-time high yesterday but oil prices were choppy and base metals retreated as US dollar volatility limited momentum for commodity markets. Gold hit $1,068.30 a troy ounce, a record, pushing past the previous peak of $1,061.20 reached last Thursday as bullion's record-breaking run showed little sign of exhaustion. Gold later eased back to $1,064, up 0.8 per cent on the day. Andrey Kryuchenkov, analyst at VTB Capital, said although he was "sceptical" about the long-run sustainability of the rally, speculators could still drive gold higher looking for protection against the possibility of a collapse in the dollar. Traders have focused on $1,100 as the next "round number" target for gold while technical analysts at Barclays said that looking into next year, "the prospects for a run at $1,500 should not be underestimated". Crude oil prices were volatile with Nymex November West Texas Intermediate reaching $74.47 before easing back to settle 88 cents higher at $74.15 a barrel. ICE November Brent crude closed $1.04 higher to $72.40 a barrel. Eugen Weinberg, commodities analyst at Commerzbank, said global oil stocks would have to fall from current high levels to justify crude prices remaining above $70 a barrel. Mr Weinberg also said a significant decline in inventories was unlikely due to overproduction by Opec and the expansion of output in big non-Opec countries such as Russia. Base metals gave up early gains and moved lower as traders took profits ahead of the annual dinner hosted by the London Metal Exchange. Copper fell 2.1 per cent to $6,145 a tonne after a possible strike in Chile at Escondida, the world's biggest copper mine, looked to have been averted after workers accepted a wage offer from BHP Billiton. Also adding to downward pressure were cautious comments from Bret Clayton, chief executive of Rio Tinto's copper business, who said demand in the US and Europe had yet to recover and that Chinese imports would slow to 150,000-200,000 tonnes a month, compared with almost 400,000 tonnes a month in the first half of the year. Nickel prices have risen 56.4 per cent this year, helped by a huge expansion in Chinese steel output in the early part of 2009 which has been followed by a recovery in stainless steel output in the US, Japan and Korea in the third quarter. But some traders remain concerned that stainless steel production has run ahead of demand and point to rising nickel inventories as a potential warning sign. David Wilson, head of metals research at Société Générale, said that even in the event of output cuts by stainless steel producers in the fourth quarter, production rates would remain above the levels seen in the first half of 2009. "On the stainless demand side, it is highly likely that auto scrappage schemes in Germany and the USA will be re-introduced or extended as they have been in the UK and France, which should provide support for steel demand, and therefore nickel," said Mr Wilson. Nickel lost 2.8 per cent at $18,300 a tonne, while aluminium fell 1.9 per cent at $1,910 a tonne and lead dropped 4.6 per cent at $2,190 a tonne. .Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.