Oil and Gold Prices Fall as Dollar Strengthens

Both crude oil and gold futures fell as the unexpected news of hike of interest rate in India came through along with the signs of an unlikely help from European Union for the severely debt ridden Greece.

The light, sweet crude oil futures slated for April delivery saw a decline of 2.3% at the New York Mercantile Exchange, valued at a lower rate of $78.83. This is the lowest that the futures have traded since beginning March. Even the May contract for light crude is down 2.2%.

The seasonal demand usually soars in summers and the expectation is increase of crude oil prices for the period. Most of the increase in crude demand is because of the heightened demand for gasoline during the summers. If the demand does not go up as expected, gasoline futures will drop, taking down along with the crude prices as well.

An important reason for the drop of crude is the strengthening of the dollar as Euro weakens because of the Greece debt crisis. If a resolution does not come through quickly, the dollar is likely to go up further, taking down the oil along with it. Also, it is feared that the tightening monetary policies in the emerging economies to reign in inflation is likely to hurt the demand for crude and gold.

Gold futures slated for April delivery also dropped by 0.6%, which is gold losing about $6.9 on the Commodity Exchange in New York. This values gold at around $1100.7 an ounce. With the dollar rising and the recent increase in the reverse repurchase rate to 3.5% from 3.25% by the reserve bank last week, is likely to pull down all commodity prices.

China is also expected to follow suit after India’s decrease of interest rate to curb the growing inflation. This may lead to several nations taking similar measures causing the commodities to drop down in value. The silver for May delivery also declined by as much as 1.5%. At this decline, it will be valued at $16.77 an ounce.

Much of the future of commodity prices will depend on the turn of events at this week’s European Union Summit. The German Chancellor, Angela Merkel recently voiced out the possibility of Greece seeking help from the International Monetary Fund. The statement has raised concerns on whether the European Union will finally come together to offer an assistance package to Greece to recover out of its huge debt.

Speak Your Mind