Tags: oil | crude | gold

Oil Price Falls on China, Europe Data; Gold Also Weak

Thursday, 22 March 2012 05:32 PM

The volatility in oil showed little signs of ebbing on Thursday as crude prices fell about 2 percent for a second time in a week, driven by weak Chinese and European manufacturing data.

Gold also retreated, hitting two-month lows, as the worries about China and Europe crossed over to a market that usually rises as a hedge to such concerns. Copper and a few agricultural markets, barring wheat, also slipped into the red.

The 19-commodity Thomson Reuters-Jefferies CRB index fell 1.2 percent for its biggest decline in two weeks. The sharpest loss of the day was in arabica coffee, which slumped more than 4 percent.

U.S. crude oil closed down $1.92 at $105.35 a barrel. The market had fallen more than $2 just two days ago, before rebounding on supply scares linked to Iran.

London's Brent crude lost more than $1 to touch a session low of just above $124.

"There's a bit of a China backlash at the moment, and we should expect more turbulence as people assess whether China is heading for a hard or a soft landing," said Filip Petersson, commodity strategist at SEB in Stockholm.

Chinese factory activity shrank in March for a fifth straight month, with the rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index (PMI) showed.

The eurozone economy took an unexpected turn for the worse in March, hit by a sharp fall in French and German factory activity that even the most pessimistic economists failed to predict, business surveys showed.

Gold, trading more like other risky commodities and financial assets than the geopolitical and economic hedge it once was, fell to its lowest levels since January.

The spot price of gold, which tracks trades in bullion, lost more than 3 percent to touch a session bottom below $1,630 per ounce.

After January's gain of more than 11 percent, bullion has fallen steadily in the past seven weeks, although it still shows a gain of nearly 5 percent on the year.

The market turned after the Federal Reserve gave little sign of approving a third round of quantitative easing amid stronger U.S. economic data. Weak U.S. inflationary data has also undermined investor confidence in gold as a hedge.

Benchmark copper futures in London ended down about 2 percent at $8,290 a tonne, from Wednesday's close of $8,455.

© 2018 Thomson/Reuters. All rights reserved.

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Thursday, 22 March 2012 05:32 PM
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