Commodities markets steadied on Tuesday after sharp falls in the previous session as the ongoing storm sweeping global financial markets showed no sign of abating.
Gold rose 2.5 per cent to $879 a troy ounce in late London trading after touching a high of $890.60, supported by elevated levels of risk aversion and safe haven buying. Gold prices have risen more than 20 per cent since Lehman Brother’s collapse.
The world’s largest gold exchange traded fund, the New York-listed SPDR Gold Trust, said its bullion holdings rose to 744.54 tonnes by late Monday, up 4.59 tonnes from Friday, but still below a record high of 755.26 tonnes hit last week.
Oil prices staged a modest recovery after sinking below the $90 a barrel level in the previous session amid fears that the credit crisis will damage energy demand. Oil found support from news that Pemex, the state-owned Mexican oil producer, had started to evacuate staff from four offshore platforms in the Gulf of Mexico owing to concerns about tropical storm Marco.
Nymex November West Texas Intermediate rose $2 to $89.81 a barrel after touching a high of $93.02 while ICE November Brent gained $1.18 to $84.86 a barrel.
“We seem to be drifting in and out of panic mode,” said Edward Meir of MF Global. “Buyers are sitting on their hands while sellers are liquidating positions and fleeing towards the safety of cash.”
Base metals also rebounded with bargain hunters helping copper to rally 2.5 per cent to $5,610 a tonne in spite of an increase of 9,600 tonnes in LME stocks. Aluminium moved 2.2 per cent higher to $2,294 a tonne. Lead added 1.4 per cent at $1,640.25 a tonne while nickel gained 1 per cent at $14,210 a tonne, zinc gained 1.5 per cent at $1,551 a tonne and tin firmed 0.2 per cent at 416,250 a tonne.
The fall in commodity prices had been exacerbated by consumers, such as the automotive industry, running down stock levels before ordering new shipments owing to uncertainty about future demand, industry executives said.
In New York, agricultural commodities were mixed with CBOT December corn down 1 cent to $4.23 a bushel but CBOT December wheat up 16 cents to $6.11½ a bushel and CBOT December soyabeans gained 21 cents at $9.43 a bushel. Meanwhile ICE March sugar rose 2.5 per cent to 12.08 cents a pound, helped by trade buying and short covering.
The United Nations warned on Tuesday that the production of biofuels from agricultural commodities was doing more harm than good.
The UN’s Food and Agriculture Organisation said that demand for biofuels was leading to “continued upward pressure” on agricultural commodity prices.
The group called for a review of “current policies supporting, subsidising and mandating biofuel production and use”.
“While biofuels will offset only a modest share of fossil energy use over the next decade, they will have much bigger impacts on agriculture and food security,” the FAO said in its annual report, The State of Food and Agriculture 2008.
Barclays Capital has resumed sales and trading in foreign exchange and commodities for Lehman Brothers’ clients.
BarCap paid $1.75bn to acquire Lehman’s North American investment banking and capital markets businesses after the US investment bank filed for bankruptcy last month.
