Oil and gold up after nuclear test

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Oil spiked above $61 a barrel and gold prices rose on Monday after North Korea said it had conducted a nuclear test, sparking condemnation from around the world and intensifying geopolitical tensions.

ICE November Brent rose $1.16 to $60.99 a barrel after it hit $61.38 earlier in the session. Nymex November West Texas Intermediate increased 87 cents to $60.63 a barrel after it reached a session high at $61.09 a barrel.

North Korea’s nuclear test added to the continuing tensions between the west and Iran over Tehran’s nuclear enrichment programme.

Gold hit $580.75 before easing back to end trading in London 0.4 per cent higher at $575.80 a troy ounce. bolstered by increased geopolitical uncertainty.

Explaining the relatively muted price response, John Reade of UBS said gold tended to move higher on increased risk aversion only when oil supply was threatened or when there were large oustanding short positions in the bullion market.

Gold’s strength helped other precious metals with silver up 2.4 per cent to $11.36 a troy ounce. Platinum firmed 0.8 per cent to $1,082 a troy ounce, helped by the return of Chinese buyers after a week long holiday. Platinum volumes on the Shanghai Gold Exchange on Monday were the highest all year at 504kgs. Palladium rose 1.4 per cent at $300 a troy ounce.

Base metals rose in thin trading at the start of London Metal Exchange week. Nickel hit a record $30,250 a tonne before retreating 0.2 per cent to $29,450 a tonne. Inventory levels remain very low with just 2,652 tonnes of nickel available for delivery to the market, less than one-day’s worth of global consumption. Macquarie Research raised its 2007 average price forecast for nickel by 34.5 per cent to $21,495 a tonne and said slower demand growth next year would bring some relief from the extreme supply shortages which have developed but there were still upward risks for prices if producers struggled to bring new capacity in to the market.

Macquarie also raised its 2007 price forecast for for copper by 16.4 per cent to $6,063 a tonne and for lead by 50 per cent to $1,323 a tonne. Copper firmed 0.4 per cent at $7,492 a tonne while lead was fractionally weaker at $1,412 a tonne.

Zinc rose 1.8 per cent to $3,655 a tonne after the International Lead and Zinc Study Group predicted a continuing market deficit in 2006 and 2007. The study group forecast a that global demand for refined zinc would increase by 3.9 per cent to 11.06m tonnes in 2006 and by 2.6 per cent to 11.35m tonnes in 2007. After falling in 2005, US demand is expected to recover strongly this year with an increase of 7 per cent followed by flat growth in 2007. Chinese demand growth is seen accelerating from 4.7 per cent this year to 6.9 per cent next year with China accounting for about 30 per cent of global zinc usage by 2007.

Wheat prices in Chicago rose to a a fresh 10-year high, up 30 cents to $4.94 a bushell.

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