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Ardent Listener
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 Posted - 08/17/2007 : 20:18:15
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Crude Oil, Copper, Gold Advance After Unexpected Fed Rate Cut
By Chanyaporn Chanjaroen and Halia Pavliva
You must be logged in to see this link. Traders at the New York Mercantile Exchange
Aug. 17 (Bloomberg) -- Crude oil, copper and gold advanced after an unexpected cut in the Federal Reserve's discount rate eased concerns that a credit crunch will slow economic growth and hurt demand for raw materials.
The Fed, in an unscheduled announcement today, cut its discount interest rate by 0.5 percentage point to 5.75 percent and said it's prepared to take further actions to ``mitigate'' damage to the economy from the rout in global credit markets.
``The Fed cut rates, and the stock market started to scream, and commodities followed,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. He has traded precious metals for 34 years.
Crude oil for September delivery rose 98 cents, or 1.4 percent, to $71.98 a barrel on the New York Mercantile Exchange. Copper for delivery in three months advanced $270, or 4 percent, to $7,010 a metric ton on the London Metal Exchange. Gold gained $8.80, or 1.3 percent, to $666.80 an ounce in New York.
``There is a fear the credit crunch could lead to weaker demand for oil products, and this is trying to take some of the fear away,'' said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich AG in Vienna.
Brent crude for October settlement rose 1 percent to $70.44 a barrel on London's ICE Futures Exchange. Copper futures for December delivery rose 5.65 cents, or 1.8 percent, to $3.1475 a pound on the Comex division of the New York Mercantile Exchange.
Consumer Confidence
The rate cut is providing ``confidence,'' said Mo Ahmadzadeh, president of metals trading at Mitsui Bussan Commodities Ltd. in New York, said today by phone. Supply and demand for industrial metals ``will remain unchanged unless this crisis will destroy consumer confidence and employment.''
Silver followed gold higher, adding 30.5 cents, or 2.7 percent, to $11.80 an ounce.
The Fed move may spur ``some fresh buying in the gold exchange-traded funds from long-term investors,'' said James Moore, an analyst with London-based TheBullionDesk.com.
Equity markets in the U.S. and Europe rallied after the Fed's cut. BHP Billiton Ltd., the world's largest mining company, rose 5.6 percent in London, while Anglo American Plc jumped 4.1 percent.
The gains in commodities may be short-lived, analysts including Prospector Asset Management's Kaplan said.
``This is a short-term fix and the only question is: how long will it last,'' he said. ``In my opinion, it may last for two or three days.''
Metals May Fall
David Threlkeld, a metals trader who is president of Resolved Inc. in Scottsdale, Arizona, said prices will decline.
``We have over-inflated everything. Metals are overpriced by at least 100 percent, except maybe aluminum,'' said Threlkeld, who has traded metals for 40 years. Metals ``have the same problems as in the subprime market,'' he said. ``The metals markets are poised to go through the same circomestances.''
Hedge-fund managers and other large speculators increased their net-short position in New York copper futures by 7 percent in the week ended Aug. 14, U.S. Commodity Futures Trading Commission data show.
``Copper prices may come back to about $1 per pound, which may take several months if not a couple years,'' said John Gross, director of metals management at Scott Brass Inc. in Cranston, Rhode Island, and publisher of Copper Journal. Gross has traded metals for more than 30 years. ``We have been and will remain in a volatile environment.''
Bank Lending
David Thurtell, an analyst at BNP Paribas, said gains in metal prices may be limited by evidence of a slowdown in the U.S. economy and rising subprime loan defaults that have put a squeeze on bank lending.
``The trouble we have had in the past week or so will pale into insignificance if U.S. unemployment starts to rise,'' Thurtell said today in an e-mail.
Initial unemployment claims rose 6,000 to 322,000 in the week ended Aug. 11, the Labor Department in Washington said yesterday. The number of new houses built in the U.S., the world's largest user of copper after China, fell to the lowest in a decade last month, the Commerce Department said.
Among other metals traded on the LME, nickel gained $900 to $26,000 a ton. Tin was unchanged at $13,500 a ton, erasing earlier gains. Aluminum gained $25 to $2,495 a ton, lead rose $85 to $2,890 a ton and zinc increased $80 to $3,070 a ton.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net ; Halia Pavliva in New York at hpavliva@bloomberg.net .
Last Updated: August 17, 2007 16:04 EDT
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Fanaticism is doubling one's efforts, yet forgetting one's purpose.
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n/a
deleted
42 Posts |
 Posted - 08/18/2007 : 00:17:50
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In short, it came back up.
They made the title sound like it was up BECAUSE of the Fed Res., when in fact it was AFTER a dive yesterday indirectly due to the Fed Res.
I try not to say 'the Fed(s)', because it has too many meanings : federal government & employee (Congress to agent, undercover or not), Fed Res, and Fed Ex,....etc. |
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Oil, Copper, Gold up after unexpected fed cut
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