Commodities - Technicals lift gold, oil eyes OPEC cut

Reuters, 04.21.03, 4:59 PM ET

NEW YORK (Reuters) - Gold prices surged to 19-day highs Monday on technical support, with bullion taking its eye off postwar Iraq to focus on the state of the U.S. economy. Crude oil futures rose on expectations Thursday's OPEC emergency meeting will cut members' output in a bid to stem a slide in prices, while coffee prices hit two-month highs. COMEX gold ignored a steady dollar and the stock market to head higher, but an Easter Monday holiday in major gold centers like London, Sydney and Hong Kong kept trade activity thin. "There is a little bit of Far East buying here. It's kind of weird with the dollar strengthening up," said a trader. Bullion is seen as an alternative currency in itself and tends to move in the opposite direction from the dollar, which gained against the European euro currency. The market was also beginning to wean itself of Iraq for price direction a month after U.S.-led forces entered the country. President Saddam Hussein has since been toppled from power and efforts to rebuild the nation are under way. Bullion was now bringing into its focus the state of the economy and corporate earnings in the United States. Private research firm, the Conference Board, said Monday the index of leading economic indicators fell 0.2 percent last month after a 0.5 percent drop in February. Wall Street economists polled by Reuters forecast a 0.1 percent decline. "The good news is that it's not getting worse. The bad news is that it's not going to get better this spring and maybe even this summer," said Ken Goldstein, the board's chief economist. While some welcomed the early end of the war in Iraq as the first step toward economic recovery, Goldstein does not think the end of fighting will necessarily boost growth. Imbalances in the U.S. economy are caused by domestic factors, he said. "The issue of consumer confidence is of far greater importance than what is or what isn't going on in Iraq," he said. COMEX June gold ended $6.30 higher at $333.90 an ounce. NYMEX crude oil futures ended just shy of $31.00-a-barrel market amid expectations that OPEC will decide to cut back members' production at its Thursday meeting. Gains were pared by news that oil production in OPEC member Venezuela, the world's No. 5 petroleum exporter, is now edging toward the 3.1 million barrels per day pumped before a two-month strike crippled the industry in December. "This market is expecting an OPEC production cut ... by how much is the question," said a NYMEX floor trader. Iran's oil minister, Bijan Zanganeh, was quoted as saying on Saturday that members who had overshot their OPEC production quotas should be the first to cut output. But Zanganeh also said OPEC had yet to formally discuss a reduction in output ahead of the Vienna meeting Thursday, according to an Iranian newspaper. Zanganeh, who said last week OPEC must cut output to below its ceiling of 24.5 million bpd to keep oil prices from crashing, indicated that any cut would be made after May 1. OPEC fears a seasonal weakening of demand in the second quarter amid high production coinciding with Iraqi export resumption could cause prices to fall steeply. OPEC estimated Friday that 10 quota-bound members pumped 26.06 million barrels in March, 1.56 million above the quota, just as Iraq exports were halted due to the war. But the U.S. Energy Information Administration estimated that OPEC production had shot up to 27 million bpd. NYMEX May crude oil ended 32 cents higher at $30.87 a barrel. May gasoline rose 0.32 cent to 90.98 cents a gallon, while May heating oil rose 2.72 cents to 80.08 cents. CSCE coffee rallied to two-month highs as commodity funds covered their short positions, and on speculative buying ahead of first notice day for deliveries against the May contract. U.S. green coffee roastings in the week ended April 5 totaled some 300,000 60-kg bags, down from 350,000 bags the previous week and 330,000 bags in the corresponding week one year ago, according to Complete Coffee Coverage. In the year to April 5, roastings totaled about 5,245,000, compared with 5,260,000 bags in the same period a year ago. CSCE July coffee ended 0.60 cent higher at 65.65 cents a pound.