Business | Markets
Gold rises as US job market weakens
Crude oil rose more than $1 a barrel as the dollar fell against the euro, prompting investors to purchase commodities.
- Bloomberg
- Published: 00:34 April 5, 2008
New York: Crude oil rose more than $1 a barrel as the dollar fell against the euro, prompting investors to purchase commodities.
The dollar weakened after a government report showed the economy lost jobs for a third straight month in March, raising concern that the US is entering a recession. Investors have moved money into commodities to hedge against inflation and because the returns have outpaced those of financial markets.
"The oil market hasn't moved on the fundamentals for a long time,'' said Tom Bentz, a broker at BNP Paribas in New York. "The movement in prices has been all about the falling dollar and the flow of money into the commodity markets.''
US crude rose $1.66 to $105.49 a barrel by 1615 GMT. Prices are up 64 per cent from a year ago.
London Brent crude gained $1.29 to $103.81 on London's ICE Futures Europe exchange. Futures reached a record $108.02 a barrel on March 14.
US payrolls shrank by 80,000, more than forecast, after a decrease of 76,000 in February that was more than initially reported, the Labour Department said on Friday. The jobless rate climbed to 5.1 per cent from 4.8 per cent.
New York futures prices rose to a record $111.80 a barrel on March 17 in New York as investors purchased commodities in response to the plunging dollar. Gold, platinum, wheat and soybeans have all been pushed to records over the past two months.
Opec's View
"We are seeing factors other than fundamentals drive the market,'' Nigerian Oil Minister Odein Ajumogobia said on Thursday at an oil summit in Cancun, Mexico.
Members of the Organisation of Petroleum Exporting Countries (Opec), which controls 40 per cent of the world's oil are scheduled to hold an informal meeting in Rome on April 20.
The decline in US consumption is being countered by demand from India and China, Ecuador's energy and mines minister Galo Chiriboga said in Cancun.
Ecuador is Opec's newest and smallest member.
The dollar fell against the euro and yen on yesterday in volatile trading with investors seeing both positive and negative impacts in the US jobs report for March.
"The payrolls number confirms what many people know about the US economy - that it is weakening," said Adam Fazio, a currency strategist at CIBC World Markets, New York.
The euro was last up 0.3 per cent at $1.5723 but well off March's record peak above $1.59.
The dollar was down 0.4 per cent against the yen at 101.86 yen, still on track for its biggest weekly percentage gain since February 2004 at current prices. The dollar fell 0.2 per cent against a basket of six currencies to 71.988, and down 0.4 per cent at 1.0056 Swiss francs.
The dollar at first tumbled on the report but even as it fell, some foreign exchange analysts were suggesting the dollar's downward momentum would be short-lived.
Briefly that proved correct with the dollar moving back into positive territory against the yen before resuming its decline.
'Not alarming'
"While [the data] is weaker than expected, the report is not especially alarming," said Brian Dolan, chief currency strategist, at Forex.com in Bedminster, New Jersey.
"This is likely to keep risky assets from collapsing after the initial shake-out lower."
Overall, investor sentiment has improved in recent sessions, and futures traders are now expecting only a 25 basis point rate cut from the Federal Reserve this month. The Fed has slashed rates since September by a total of three percentage points to 2.25 per cent to deal with the credit crisis and shield the economy from an ailing housing sector.
Late on Thursday, San Francisco Fed President Janet Yellen echoed comments on the economy made by Fed Chairman Ben Bernanke earlier this week, saying the US economy has "all but stalled and could contract" in the first half of 2008.
Elsewhere, the Australian dollar managed a 0.3 per cent gain against its US counterpart despite February retail sales in Australia unexpectedly dipping 0.1 per cent from the previous month.
Reserve Bank of Australia Governor Glenn Stevens said yesterday that growth in domestic demand was moderating despite uncomfortably high inflation.
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