Oil, gold see-saw on Middle East conflict
Oil prices slid from near record highs and gold hit and then recoiled from a two-month peak on Monday as war raged between
Israel and Hizbollah, but prices could soar again if Israel widens its attacks, analysts said.
Israeli aircraft killed 17 people on Monday after Hizbollah rockets struck deeper than ever into Israel, but Israel’s Channel 10 television quoted a senior military official as saying the attacks could end in days.
An Israeli government spokesman subsequently said Israel had no intention of halting its offensive against Hizbollah.
Gold , which rose 1.3 percent to $675.00 an ounce earlier on Monday, slumped to $648.60/650.10 at 1519 GMT from $666.30/667.80 in New York late on Friday.
“Why is the safe haven down on what should be its birthday? To some extent the fall today has been profit taking, not withstanding the tensions in the Middle East,” Ross Norman, analyst at TheBullionDesk.com, said.
“What we are seeing is the market a bit more sensible, more in line with its fundamentals. Even with this profit taking, we are still well ahead of the game.”
U.S. light sweet crude for August delivery was down 68 cents at $76.35 a barrel by 1430 GMT, after earlier peaking at $77.74, not far from Friday’s record high of $78.40.
“The situation is still unclear. It’s hard to say where prices will go. They are moving headline by headline,” Man Financial analyst Edward Meir said.
The conflict and concerns it could spread to oil-producing areas of the region spurred oil buying and demand for safe-haven assets, like gold.
Paul Horsnell, commodity analyst at Barclays Capital said investors were especially concerned by rhetoric from the United Kingdom and United States, which blamed Syria and
Iran for the escalating hostilities between Israel and Hizbollah.
“The major fear in the market is whether Israel widens its attacks to include Syria,” he said.
NICKEL UP, OTHERS FALL
Nickel prices shot up to a new record high on the London Metal Exchange of $26,850 a tonne, up from $25,575/25,625 at the with investors buying nickel as available supplies of the metal dwindled to less than one day of global consumption.
“There will probably be more stock drawdowns. Everyone is talking about $30,000…I am not sure that that the physical market justifies these prices, but while the stocks are doing what they are doing, no one will want to sell,” a trader said.
Other LME metals slid with zinc down around 5.5 percent, lead 4.5 percent weaker, and aluminum off by three percent.
Three-month LME copper was at $7,685 from Friday’s close of $8,050. In May copper hit a record high of $8,800.
A six-week strike by workers at Grupo Mexico’s (GMEXICOB.MX) Cananea copper mine ended, but low global stocks and continued industrial action at another Grupo Mexico copper plant, La Caridad, and at Chile’s Escondida, the world’s biggest copper mine, supported the market.
WHEAT UP
European Union wheat prices stormed higher as soaring temperatures increased concern about the quality of harvests.
Feed wheat futures on Euronext.liffe rose with the key November contract up 2.50 pounds or more than 3 percent to 80.50 pounds ($146.5) a tonne.
“It is like an oven out there. The heat is starting to crisp the (wheat) crop off pretty quickly,” Guy Gagen, chief arable adviser for Britain’s National Farmers Union, said.
London cocoa futures fell more than 7 percent after briefly touching their highest point since March 2004.
The second-month December contract traded down 72 pounds, or 7.2 percent, at 930 pounds a tonne by 1432 GMT after trading between 1,013 and 926 pounds.
(Reuters)
