Dollar slump lights fire
in metals, oil retraces after surge
Send a link to a friend
[February 04, 2016]
By Eric Onstad
LONDON (Reuters) - Gold and zinc surged to
their highest in over three months on Thursday, buoyed by a tumble in
the dollar, while oil failed to build on sizzling gains in the previous
session as doubts grew about whether producers would agree to cut
The dollar tripped to its lowest levels in three months against a
basket of currencies, supporting commodities priced in the U.S.
currency by making them cheaper for buyers outside of the United
A collapse in expectations of a further rise in U.S. interest rates
this year drove the dollar index to its biggest daily fall in over
two months on Wednesday.
"The (Fed funds futures) now sees only a 12 percent probability of a
rate hike in March so I am not expecting the price of gold to drop
soon," said Bernard Dahdah, an analyst at Natixis, adding he
expected it to trade around current levels in the next two
months.Spot gold touched $1,147.40 an ounce on Thursday, its highest
since Oct. 30, after rallying 1.2 percent on Wednesday, the biggest
daily gain since Jan. 20.
Rising U.S. rates make a non-yielding asset such as gold less
Gold has now gained nearly 8 percent since the start of this year as
uncertainty about the health of the global economy has made
financial markets volatile, pushing investors into safer assets.
Gold helped the Thomson Reuters Core Commodity Index to edge up by
0.2 percent after a gain of 2.5 percent on Wednesday.
The index of 19 commodities is down nearly 7 percent this year after
dropping by a quarter in 2015 to hit its lowest level since 2002 in
December, as commodities ranging from iron ore to oil took a
Industrial metals also rallied on Thursday.
Benchmark zinc on the London Metal Exchange surged to a peak of
$1,726.50 a ton, the strongest since Oct. 29, on concern about
[to top of second column]
The wider metals market, including copper and aluminum, got support
from the weak dollar and investors closing out bearish positions
before the Lunar New Year holiday in China.
Oil, however, failed to build on Wednesday's 7 percent jump.
Brent crude dipped below $35 a barrel, pressured by oversupply and
scepticism that Venezuela's effort to lobby crude producers for
output cuts would succeed.
Prices have gained almost 30 percent since falling to $27.10, the
lowest since November 2003, on Jan. 20.
"It's a non-starter," Carsten Fritsch, analyst at Commerzbank, said
of Venezuela's effort. "Without Saudi Arabia it would not make sense
In agricultural markets, U.S. corn and soybean prices edged higher
with support from the falling dollar, but favorable weather for
South American crops helped keep prices shy of six-week highs hit
(Additional reporting by Susan Fenton, Alex Lawler, Gus Trompiz and
Colin Packham, editing by David Evans)
[© 2016 Thomson Reuters. All rights
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.