Oil, gold knocked hard by Dubai default fears

SINGAPORE – Commodities withered on Friday as investors scrambled for the exits, scattered by fears that a Dubai debt default could unleash a new banking shock to choke off the world’s fragile recovery from financial crisis.

Prices of commodities from oil and gold to grains dropped on a rebound in the dollar as investors scrambled out of riskier assets, with the US currency up half a per cent against a basket of currencies.’A lot of investors have opted for very short-term trade lately, and change their positions constantly. They get nervous when they hear even the leaves rustling in the wind,’ said Zhu Yanzhong, an analyst at Jinrui Futures in Shanghai.Dubai’s woes hit Asian financial markets hard, dragging Japan’s Nikkei index to a four-month closing low, amid concerns about banks’ potential exposure to any bad debt in the Gulf.Dubai has asked creditors of two of its flagship firms for a standstill on debt running into tens of billions of dollars as part of plans to restructure Dubai World, the conglomerate that spearheaded the emirate’s growth.Crude oil, already riven by demand jitters over a gloomy economic outlook for Japan and bulging US fuel inventories, fell by five per cent from Wednesday’s settlement to US$74,03 a barrel Friday.There was no Thursday settlement price because of the US Thanksgiving holiday. The New York Mercantile Exchange had a shortened floor trading session on Friday.Oil hit a year-high of US$82 early last month and is up nearly by more than two thirds so far this year, but is still just half the July 2008 high over US$147 a barrel.Spot gold slid to US$1 151,60 an ounce, down 3,4 per cent from New York’s notional close. On Thursday the precious metal hit an all-time high near US$1 195 as the dollar fell to 15-month lows against a basket of currencies. – Nampa-Reuters

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