Daily Gold Update

Source: Financial Times

London— Metal prices rose strongly this week as concerns about supplies of copper, lead, nickel and tin combined with firm demand from China pushed some metals to record levels this week.

The mood in metals markets has changed significantly since the start of the year, when traders were then more worried about slowing consumption and rising mine output.

Copper reached a five-month high when it touched $7,510 a tonne on the London Metal Exchange on Thursday, up $90 on the previous close. The three-month copper price rose more than 9 per cent last week. The price rise has been driven by stronger-than-expected demand from China with copper imports up 17 per cent in the first two months of this year, compared with last year.

Nickel prices were again hitting new highs. The three-month LME nickel price moved within a whisker of touching the $50,000 level for the first time ever, when it reached a peak of $49,875, up $475 on the day and up 9 per cent for the week, and 50 per cent so far this year.

Lead, often seen as a laggard in the five-year metal price rally, moved to new peaks last week when it hit $2,028 a tonne on Thursday, up $18 on the day and more than 5 per cent on the week.

Adam Rowley, metals analyst at Macquarie Bank, said lead prices have been pushed higher by a series of mine delays and disruptions combined with falling stockpiles to relatively low levels.

�We are facing tighter supplies, which has become more of a concern than any perceived slowdown in the US economy,� he said.

Gold prices also firmed with bullion quoted at $674.70 in late London trade on Thursday, up 70 cents on the day and almost 2 per cent on the week.

Brent crude futures last week reached their highest level for the year ahead of the release of the British sailors.

ICE Brent futures for May delivery eased 33 cents to $68.07 a barrel in late afternoon trade on Thursday. This was steady on the week, but down from a seven-month high of $68.87 reached on Monday.

One of the more notable developments in the oil markets over the past couple of months is not only the rise in the price from $50 to close to $70, but the widening gap between the European and US benchmark prices. Europe�s Brent normally trades at a discount to West Texas Intermediate, the US counterpart, but this week it reached its largest premium, $4.30, to the WTI price.

May WTI dropped 41 cents to $63.97 a barrel in early afternoon trade, down three per cent on the week. Robert Laughlin, senior energy broker at Man Financial, said the refinery maintenance season has put more than 15 per cent of US refinery capacity offline and the storage capacity at Cushing, Oklahoma where WTI is delivered is almost full.

�This price difference will only be temporary, once you have a few refineries coming back on line, WTI and Brent prices should start to move closer, but it still means we could be in for tight supplies for gasoline this summer,� said Mr Laughlin.

Sugar futures on the New York Board of Trade reached their lowest level since August 2005 when the May contract touched 9.66 cents a pound as large increases in Brazilian and Indian production outpace demand. Sugar demand continues to rise, and ethanol consumption of sugar cane has also boosted demand. The supply responses followed the rise in sugar prices last year to near 30 year highs of 19.73 cents.

Nybot sugar futures fell more than one per cent last week. The International Sugar Organisation said Friday that the global sugar surplus for this year will be revised up to between 8.5m and 9m tonnes, from the 7.2m tonnes forecast in February.

The ISO originally forecasts a surplus of 2.17m tonnes last August.

Wheat futures rose on Thursday on fears that impending cold weather could hit the US wheat crop. May wheat closed 13.75 cents higher at $4.45 a bushel on the Chicago Board of Trade.