Commodities markets summary

A summary of trading in key commodities markets overseas:

ENERGY

World oil prices have fallen as traders mostly took their cue from the rebounding US dollar and output remained strong, dealers say.

US benchmark West Texas Intermediate (WTI) for delivery in July fell $US1.69 cents from Friday's close to $US58.03 a barrel.

In London trade, Brent North Sea crude for July lost $US1.80 to $US63.72 per barrel.

The dollar powered to a fresh eight-year high of 123.3 yen on Tuesday, while the euro, slipping to $US1.0875, was weighed by growing concerns about Greece's bailout talks as a repayment deadline looms.

"Crude oil prices remained under pressure ... as the US dollar continues its strong upside momentum," said Myrto Sokou, senior energy analyst at the Sucden brokerage in London.

The stronger greenback makes crude more expensive for buyers using weaker currencies.

Bart Melek of TD Securities noted as well that the OPEC cartel, at more than 31 million barrels a day, is still producing well over its quota cap, keeping the market generously supplied.

"The other factor beside the US dollar, is that there is concern about the demand side particularly from Asia, China specifically," he said.

PRECIOUS METALS

Gold dropped almost two per cent on Tuesday as the US dollar extended gains following a raft of strong American data.

Spot gold dropped to a two-week low of $US1,185.35 an ounce earlier and was down 1.7 per cent at $US1,186.90, its biggest drop since April 30.

US gold futures for June delivery settled down $US17.10 at $US1,186.90 an ounce.

"Intriguingly, gold has failed to find much if any demand from safe haven buying ... today despite the sharp drop in European and US equity markets," said Fawad Razaqzada, technical analyst for Forex.com.

"This, we think, argues against a sharp recovery now."

The US dollar rallied 1.3 per cent against a basket of leading currencies, after data showed US business investment spending plans increased solidly for a second straight month in April.

Separately, new US single-family home sales rose more than expected in April and consumer confidence rose in May.

This added to optimism after strong inflation numbers on Friday and Fed Yellen's comments that interest rates will be raised this year.

A stronger US dollar makes gold more expensive for holders of other currencies, while higher US interest rates would dent demand for the non-interest-paying metal, increasing the opportunity cost of holding it.

"The next big data release from the US or the next confirmation of an interest rate hike, whenever that will come, I think that's when we are going to see the final wash out in gold," Mitsubishi Corp strategist Jonathan Butler said.

Gold's inverse correlation with the dollar has started to strengthen again, and weaken against yields, Barclays said in a note.

"We maintain the view that the third quarter is likely to be the weakest quarter for gold, given that we expect the Fed to start increasing rates in September, but the potential downside is likely to be limited," it said.

Bullion traders will focus on Greece, as any worsening of its debt crisis could potentially trigger demand for gold coins and bars. The metal is usually seen as a hedge against political and financial risk, although the impact on demand for metals from wider political worries is usually short lived.

Silver fell 2.3 per cent to a two-week low of $US16.72 an ounce. Platinum dropped 2.3 per cent to $US1,121.24 an ounce and palladium slipped one per cent to $US778.50 an ounce.

BASE METALS

Copper hit a three-week low, as a strong US dollar spurred profit-taking and overshadowed hopes that demand from top consumer China will recover.

China's state planning agency on Monday listed more than 1,000 proposed projects totalling 1.97 trillion yuan ($US318 billion) it is inviting private investors to help fund, build and operate. Copper is used extensively in construction.

But weighing on copper, the dollar rose more than one per cent against a currency basket, helped by upbeat US consumer confidence and durable goods data and by increasing nervousness about Greece.

A stronger US dollar makes dollar-priced metals more expensive for holders of other currencies.

"Fears are emerging regarding copper's recent strength. People are saying its done too much too soon. Sellers are emerging to test recent support," a trader said.

Three-month LME copper cut early gains to close down 0.9 per cent at $US6,106.50 a tonne. Copper has been on a mostly upward trajectory since touching five and a half year lows in January.

London Metal Exchange data showed copper stocks fell to 327,800 tonnes. The metal was widely tipped to move into significant surplus this year, but this has yet to transpire, with LME stocks having failed to rise for the last two months.

"There was over-optimism about mine supply (this year). Physical demand has been disappointing (but) we expect it to pick up in the second half," said Caroline Bain, senior commodities economist at Capital Economics.

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.7745+0.0009+0.11%
    AUDUSD=X
    0.5022-0.0006-0.12%
    AUDGBP=X
    0.7092-0.0022-0.30%
    AUDEUR=X