Tuesday, 3 May 2011

Death of Osama lifts dollar but hits gold, silver and oil

The  announcement of  Osama bin Laden death has  pushed the dollar higher, reversing recent weakness, and caused commodities priced in that currency including gold, silver and oil to fall.

Whether any of these hold long term remains to be seen but the historic event instantly created losers as well as winners across global markets. Oil and gold prices fell by as much as two per cent on news of bin Laden’s death and silver slumped by 10 per cent, its steepest fall since late 2008. Brent crude fell by 98 cents to $124.91 a barrel, more than $2 below last month’s 32-month high of $127.

Oil was already down before the news about Bin Laden, after NATO air strikes over the weekend killed one of Libyan leader Muammar Gaddafi’s sons and after industry sources said that Saudi Arabia raised output in April. Spot gold prices fell by more than $5 to $1,540 an ounce immediately after the reports of bin Laden’s death, having earlier touched an all-time high of $1,576. Spot silver stood at $44.64 an ounce, down 6.6 per cent and some analysts predict further falls.

The price changes will be reflected in valuations of unit and investment trusts when trading on London Exchange recommences today and recently popular commodity funds, which saw massive inflows last year, will be the biggest losers.

The Oil markets are likely to be the most volatile given their higher sensitivity to the tug of war between lower risk overall and the possibility of isolated disturbances in some parts of the Middle East and central Asia.

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