New York: Gold in New York fell, posting the biggest weekly loss in seven weeks, on speculation that China will raise interest rates to control inflation, reducing demand for raw materials including precious metals.
Consumer prices in China rose 2.7 per cent in February, the most in 16 months, the government said on Thursday. The Reuters/Jefferies CRB Index of 19 commodities slumped on Friday, led by energy contracts, and dropped every day last week. Accelerating growth in China last year and low interest rates helped send gold to a record $1,227.50 (Dh4,507.10) an ounce on December 3.
"There's a lot of chatter that you'll have rate hikes out of China," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.
"If China raises rates, that's going to damp demand for raw materials. Gold and oil are going to be sensitive to this."
In other markets, sugar gained for the first time on concern that a slump that began in late January was overdone, and crude oil fell. The UBS Bloomberg Constant Maturity Commodity Index was little changed at 1,283.54 after dropping in each of the previous four sessions.
Futures
Gold futures for April delivery fell $6.50, or 0.6 per cent, to $1,101.70 an ounce on the Comex in New York, leaving the most-active contract down three per cent last week, the biggest weekly drop since January 22.
Gold may extend declines should the US economic recovery spur the Federal Reserve to raise interest rates before the European Central Bank, boosting the value of the dollar.
Sales by US retailers climbed unexpectedly in February from January, the Commerce Department said on Friday. Last year, gold rallied 24 per cent as the Fed kept its benchmark interest rate near zero to revive the economy. The ECB's main rate is at one per cent.
Sugar futures rose on renewed concern that the lowest prices in seven months left supplies too cheap, as long as global demand exceeds production.
India, the world's largest sugar consumer, may need to import as much as 1.5 million metric tonnes of sugar in the next three to four months, and Russia requires as much as 2.5 million tonnes, Sergey Gudoshnikov, an International Sugar Organisation economist, said on Friday by email.
Value in the market
"People are seeing value in the market," said Ricardo Scaff, a commodity trader at Rabobank Nederland in New York.
Raw-sugar futures for May delivery jumped 0.4 cent, or 2.1 per cent, to 19.67 cents a pound on ICE Futures US in New York, the biggest gain since March 5.
The most-active contract touched 18.82 cents on March 10, the lowest price since August 3, on signs of increased output in Brazil and India, the world's largest producers. Sugar futures more than doubled last year, then climbed to a 29-year high of 30.4 cents on February 1.
Crude oil declined for the first time in three days after a report showed that confidence among US consumers unexpectedly dropped this month.
Oil fell 1.1 per cent as the Reuters/University of Michigan preliminary consumer sentiment index dropped to 72.5 from February's reading of 73.6. A gain to 74 was forecast, according to the median of 68 estimates in a Bloomberg News survey. Prearranged orders to sell oil at specific prices, known as stops, may have been triggered as oil declined.
"The selling started after the consumer confidence numbers were released," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. "The market has been tenuous, and once we started working lower the move gathered strength."
Crude oil for April delivery fell 87 cents to $81.24 a barrel on the New York Mercantile Exchange, the lowest settlement since March 4. Prices earlier touched $83.16, the highest level since January 11. Oil dropped 0.3 per cent last week and is up 73 per cent from a year ago.
Precious metals settled as follows: April gold down $6.50 to $1,101.70 an ounce, May silver down 11.2 cents to $17.048 an ounce, April platinum down $4.30 to $1,608.40 an ounce, June palladium up $2.15 to $463.15 an ounce.
