Major commodities, barring gold, fell in intraday trade on Friday, as the worst plunge in Chinese manufacturing in almost six-and-a-half years further reinforced worries about the appetite for raw materials in the world’s largest commodity consumer.
Crude oil prices eased, with the US benchmark heading for a fall for an eighth straight week through Friday in its longest losing streak in 29 years while copper was poised for a seventh consecutive weekly loss in London. Gold, meanwhile, benefitted from its safe-haven status to regain some of its lost lustre, marking its best week since mid-January after a torrid July.
The preliminary reading of Caixin’s Purchasing Manager’s Index came in at 47.1 this month for China, the worst print since that of 44.8 in March 2009, according to the data by Markit, a financial information services provider that compiled the survey. A reading below 50 suggests contraction. The dismal reading dragged down global stocks and also weighed on the commodity markets.
US crude for October delivery lost 25 cents at $41.07 a barrel by 1005 GMT on Friday. Brent crude oil, too, was set for a decline in seven of the last eight weeks. It shed 30 cents at $46.32 a barrel, having settled 54 cents lower in the previous session. Apart from the fears of a deep Chinese slowdown, a coninuing glut in the global market weighed on oil prices.
Copper, too, dropped, on worries about deep structural problems in the Chinese economy and demand for industrial metals there despite data showing the refined copper imports by the world’s biggest metal consumer growing 6% in July. Three-month copper on the London Metal Exchange dipped 1.7% to $5,031.50 a tonne by 1007 GMT, just above the psychological level of $5,000. The metal had crashed to a six-year low of $4,976 a tonne earlier this week, having recorded a decline each week since early July. It has lost roughly 20% this year.
However, there was some hope left for investors, as cash copper traded at a premium of $6 a tonne to the three-month rate on the LME — its highest since May — suggesting near-term supply is getting increasingly harder to come by. Zinc and nickel declined over 2% each on Friday, while lead and tin lost more than 1% and aluminium just less than 1% in London.
However, gold prices gained on more uncertainties about the Chinese economy and its resultant impact on the global growth story. Gold’s appeal as a safe-haven asset and a hedge against inflation was also enhanced by a drop in the dollar, which fell to a near eight-week low against a basket of important currencies on Friday on receding expectations of a US interest rate hike in September following the release of the minutes of the Federal Reserve’s last policy meeting. The greenback and gold usually share an inverse relation. However, gold retreated a bit after profit-booking on Friday.
Having hit as high as $1,168.40 an ounce earlier in the session, spot gold eased 0.2% to $1,150 an ounce at 0954 GMT. Spot gold is still up over 3% this week. December gold futures in the US lost $3.20 an ounce at $1,150 an ounce at 0954 GMT.
Domestic gold prices hit two-month high
Gold prices in the national capital exceeded the R27,000-level on Friday for the first time in two months. Gold prices have surged by R2,200 in 12 straight sessions responding to a recent rally overseas and a depreciation of the rupee against the dollar.
The precious metal with purity levels of 99.9% and 99.5% surged by R480 each to R27,180 and R27,030, respectively, on Friday — the highest since June 19. The rupee on Friday plunged to a fresh two-year low of 65.83 against the dollar, making gold imports more expensive. The Indian currency has weakened especially after August 10 following China’s devluation of yuan and has since depreciated by over 3% against the dollar.