Oil, gold surge to records

LONDON – Gold and oil prices powered to record highs yesterday as investors piled in after the dollar slumped on worries about the deteriorating health of the US economy and growing speculation of further Fed rate cuts.

Speculative activity also helped boost base metals prices, while soft commodities such as coffee, cocoa and sugar surged. Spot gold rose as high as US$964,70 an ounce and was quoted at US$960,50/961,20 at 1226 GMT, against US$946,60/947,40 late in New York on Tuesday.Oil rose above US$102 a barrel, closing in on its inflation-adjusted peak of US$102,53 seen in 1980.The US currency slid to an all-time low against the euro into uncharted territory above US$1,50.The latest sell-off was triggered by Fed vice chairman Donald Kohn, who said US economic weakness was a bigger concern than inflation.The market took that as a green light and drove down the US-currency, providing the trigger commodity markets needed to trend higher.A falling US currency makes dollar-denominated commodities cheaper for holders of other currencies.”Dollar weakness does generally mean higher commodity prices,” said Aljoscha Haesen, investment manager at Forsyth Partners.But he added that the lower dollar also means margin compression for commodity firms based in non-dollar countries as their costs are normally in the local currency.”If the dollar price remains the same and you’ve got depreciation of the dollar, then there is a negative impact on your margins, unless your currency is pegged to the dollar.Gold prices have gained 16 per cent this year and platinum prices are up more than 40 per cent.Nampa-ReutersSpot gold rose as high as US$964,70 an ounce and was quoted at US$960,50/961,20 at 1226 GMT, against US$946,60/947,40 late in New York on Tuesday.Oil rose above US$102 a barrel, closing in on its inflation-adjusted peak of US$102,53 seen in 1980.The US currency slid to an all-time low against the euro into uncharted territory above US$1,50.The latest sell-off was triggered by Fed vice chairman Donald Kohn, who said US economic weakness was a bigger concern than inflation.The market took that as a green light and drove down the US-currency, providing the trigger commodity markets needed to trend higher.A falling US currency makes dollar-denominated commodities cheaper for holders of other currencies.”Dollar weakness does generally mean higher commodity prices,” said Aljoscha Haesen, investment manager at Forsyth Partners.But he added that the lower dollar also means margin compression for commodity firms based in non-dollar countries as their costs are normally in the local currency.”If the dollar price remains the same and you’ve got depreciation of the dollar, then there is a negative impact on your margins, unless your currency is pegged to the dollar.Gold prices have gained 16 per cent this year and platinum prices are up more than 40 per cent.Nampa-Reuters