Precious metals, crude oil drop over 11% on heavy sell-off

Written by Commodities Bureau | Mumbai, Oct 19 | Updated: Oct 20 2008, 05:34am hrs
On the MCX platform, gold, silver and crude oil prices declined sharply on the week ended on Friday on heavy sell off by market participants, as investors in the world market remain largely cautious about the near-term outlook, given continued signals the global economy is headed for a potentially deep recession. Gold declined to a one-month low on speculation that investors will sell the precious metal to cover losses in other markets and crude oil prices witnessed a heavy sell off during the week on account of falling demand and fear of recession in the US, Europe and Japan. Wednesday's inventory data showed a more than expected rise in crude oil stocks and a build up in gasoline stocks, which put pressure on oil prices. The base metals pack declined last week, as poor macroeconomic data coupled with concerns over demand put pressure on metals.

The MCX Crude oil November contracts were down by 12% to trade at Rs 3,537 per barrel on Friday over the previous week. With prices falling sharply, Opec has decided to take quick action and will hold its meeting in the next week.

"We expect oil prices to remain bearish in the near term with a resistance at $85 per barrel," an analyst with Angel broking said. Crude prices collapsed from their all time highs and traded at a 50% discount, which has also exerted pressure on gold prices. The MCX Gold December contracts were lower by 11% to settle at Rs 12,602 per 10 gram over the previous week. The dollar is still showing signs of strength on the back of weakness in the euro. Declining crude prices are also expected to weigh on gold prices in coming weeks.

The MCX Silver December contracts were lower by 13.4% to settle at Rs 17,360 per 10 gram over the previous week. The gold/silver ratio has made new highs. The price ratio had climbed to 81:1 last week.

The MCX Copper November contracts were lower by 4% to settle at Rs 232.85 per kg from Rs 242.80 per kg in the previous week. Prices dropped to a 33-month low last week on demand concerns amid mounting fears of a global economic slowdown.