Commodities: Aluminum and gold recover, sugar rises

“Prices were supported by the upcoming easing of coronavirus restrictions in Shanghai and weakness in the US dollar,” said Daniel Briesemann, an analyst at Commerzbank.

Industrial metal prices, particularly aluminium, copper and zinc, rallied on the London Metal Exchange (LME) during the week, helped by a weaker dollar and easing sanitation measures in China.

“Prices were supported by the upcoming easing of coronavirus restrictions in Shanghai and weakness in the US dollar,” said Daniel Briesemann, an analyst at Commerzbank.

A weaker dollar allows for greater purchasing power for investors using other currencies.

The aluminum market has “picked up significantly,” assures the expert. Evidence of the increased demand is LME inventories with just 500,000 tons of aluminum stored “at the lowest level since November 2005”.

“The recovery in metal prices appears to be resting on shaky foundations,” argues Daniel Briesemann.

The analyst remains concerned about demand from China, a very large consumer of industrial metals.

China has had to cope with a resurgence of the pandemic in recent months, affecting several parts of the country to varying degrees.

“Although Shanghai is gradually emerging from containment, the capital Beijing may be on the verge of entering as Covid cases continue to rise there,” he said.

On the London Metal Exchange, a tonne of aluminum for delivery three months ahead was trading at $2,951.00 around 15:40 GMT (17:40 Paris) on Friday, down from $2,788.00 at the close a week ago.

golden surge

The price of gold, which had suffered from the strength of the US dollar in recent weeks, recovered over the course of the week.

The price of an ounce fell to $1,786.90 on Monday, its lowest since early February before bouncing back.

“Over the past month, gold has taken a double hit from a strong dollar and a FOMC (US Federal Reserve Monetary Policy Committee, Fed) signaling an aggressive pace of rate hikes to fight inflation,” said Ole Hansen, analyst at Saxo Bank.

Gold is traded in dollars on the world market, so the rise in the greenback makes it more expensive for investors using other currencies.

Conversely, investor concerns about the US economic outlook, which could prompt the Fed to slow rate hikes, reduced momentum in the greenback and US bonds.

In that regard, “gold took advantage of the risk aversion move in the market this week,” Han Tan, an analyst at Exinity, told AFP.

“It will be necessary to see if this move continues in the context of rising interest rates,” notes Oanda analyst Craig Erlam.

An ounce of gold traded for $1,843.93, up from $1,811.79 seven days earlier.

sugar tip

Sugar prices in New York and London rose during the week, helped by lower supply mainly from Brazil, the United States and possibly India.

“Two of the largest beet-producing states in the US (Minnesota and North Dakota) have experienced significant planting delays due to cold, wet weather,” Rabobank analysts say, stretching white sugar supply.

Brazil’s sugar production is also down 51% year-on-year, according to analysts reading data from the latest report from national industry association Unica.

Brazil, the world’s largest sugar producer, “holds a big chunk of the cards for near-term sugar prices,” with “the possibility of factories favoring ethanol production,” they say.

High oil prices encourage Brazil’s use of sugar cane to produce ethanol, which has become more competitive, reducing available sugar and raising prices.

In addition, “India could decide to apply restrictions on sugar exports as it has done on wheat,” the analysts say. The country announced on Saturday it would ban wheat exports except with special government approval amid a drop in production, particularly due to extreme heat waves.

However, sugar consumption remains a problem, according to analysts at Rabobank, “particularly in regions where war or health restrictions due to Covid-19 are ongoing”.

In New York, a pound of raw sugar for delivery next July was worth 19.90 cents, up from 19.17 cents eight days earlier.

In London, a tonne of white sugar for delivery in August was worth $554.60 at the close, up from $535.70 the previous Thursday.

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