Gold rose to a seven-week high on Wednesday after data indicated further weakness in the US economy, driving the dollar lower.
The Institute of Supply Management’s index of manufacturing activity in October fell unexpectedly.
“A decisive influence on bullion is likely to be the renewed weakness in the US dollar,” said James Steel, analyst at HSBC. He indicated recent weak data, including also Monday’s Chicago PMI and Friday’s gross domestic product numbers as evidence of a slowing economy. By midday in New York, bullion was up $9.70 to $615.70 an ounce.
A number of base metals were lower following the ISM data however, as one of the index’s components – prices paid – fell below 50, indicating contraction, rather than just slowing growth.
“Just two commodities were reported up in price last month, compared with eight that were reported down,” said John Kemp at Sempra Metals. These included aluminium, copper products, fuel and rubber.
“This is the first time in more than three years the number of products reported up in price has been exceeeded by those with reported price declines,” Mr Kemp added.
Copper closed in London down $225 at $7,150, under pressure also from rising inventories in London warehouses. Aluminium fell $58 to $2,731.
Oil prices fell as US crude inventories rose by 2m barrels last week. Despite bigger-than-expected drawdowns in petrol and distillates, an unexpectedly strong recovery in refinery runs made the numbers appear less bullish.
Given the healthy state of US crude stockpiles, oil prices lost the support the inventory numbers initially gathered.
Meanwhile, geopolitical tensions appeared to be thawing a little after North Korea decided to rejoin the six-party talks after Washington agreed to discuss the financial sanctions imposed following missile tests in the Asian country.
By midday in New York, Brent crude for December delivery was down 68 cents at $58.35 a barrel, while December Nymex West Texas Intermediate slipped 54 cents to $58.19 a barrel.
Wheat futures recovered some poise after falling 3.6 per cent on Tuesday following US Department of Agriculture data that showed export inspections for the year to date were down 17 per cent on last year, indicating slower sales.
Global supply concerns drove wheat to a 10-year high of $5.57 on the Chicago Board of Trade last month, but traders are now suggesting prices may be too high and sales are being hit. Yesterday, wheat futures recovered 2¾ cents to $4.8575 a bushel.