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Commodities: Dollar slide boosts commodities

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Date: Thursday 13 Mar 2008

LONDON (ShareCast) - With the US dollar once again on the slide, the price of oil briefly topped $110 a barrel in New York before easing a little. Crude for April delivery closed at a new high of $109.92, up $1.17.

Dealers said the rise was predominantly driven by speculative rather than physical demand.

US stockpiles of oil rose 6.18m barrels to 311.6m barrels in the week to 7 March, figures from the Energy Department revealed. The gain was much higher than most analysts had been expecting.

Gasoline inventories rose to their highest level since 1993, up 1.69m barrels to 236m, but that did not stop the Gasoline for April delivery futures contract closing at a new high of $2.7286 a gallon in New York, up a quarter of a cent.

US refineries operated at 85% of capacity last week, down from 85.9% the previous week, though a dip in activity is normal at this time of year when refiners traditionally effect repairs.

Gold futures prices were also on the climb, with gold for April delivery rising $4.50 to $980.50.

Once again, the dollar’s demise was cited as a major reason for the upward movement, as investors bought gold as a hedge against inflation. The yellow metal’s price has risen by 16% this year, helped by the steady fall of the greenback and the sharp rise in oil prices, though it has yet to breach the psychologically important $1,000 an ounce level.

Silver was also wanted for much the same reason as gold. Silver for May delivery rose $0.24 to close at $20 an ounce. Copper reversed earlier losses to close higher though the prospect of a slow-down in economic growth remains a drag on the metal price. Palladium and Platinum prices were also buoyant.