Gold fell, capping its largest monthly fall in more than four years as investors went all negative on it and other commodities as the US dollar turned up.

But that might be about to moderate as its becoming clear that the US dollar has steadied around $US1.46 to $US1.48 to the euro and oil is trading around $US112-$120 a barrel while the Gulf of Mexico storm season happens (Hurricane Gustav is the new threat to the Gulf of Mexico oil and gas production and refining and distribution areas.

Oil prices have alrerady kicked higher in a special Sunday trading session in New York ahead of the holiday Monday.

The October futures contract rose $US1.67 to $US117.13 in the small session. Electronic trading will be available today in Asia and the US today and tonight as Gustav approaches New Orleans and the Gulf Coast.

The greenback meanwhile had its biggest monthly gain since the European currency began trading in 1999.

Gold has lost 19% of its value since hitting a record $US1,033.90 an ounce on March 17.

But the loss (and then a small rebound, has been very noticeable since midway through July when the US dollar stopped falling and gained on the euro on fears that Europe and Japan and Asia would slow faster than the US.

Quite a few analysts still think the US will be slow, but not slump as much as Europe over the next six to 12 months, but as we saw on Friday, US consumer spending collapsed in July once the one-off tax rebate disappeared and there’s nothing to make it come back. 

Personal income fell unexpectedly in July and inflation-adjusted spending shrank as the government tax rebate stimulus waned, but consumer confidence rose as petrol prices fell.

Personal income fell 0.7% in July, the sharpest decline since a 2.3% drop in August 2005, when Hurricane Katrina hit.

A big jump in prices in July pushed inflation to a 17-year high, eroding what little spending power consumers had. 

Consumer spending, which accounts for about two-thirds of economic activity, rose 0.2% as expected, the slimmest gain since February, and inflation-adjusted spending fell 0.4%, the biggest drop since June 2004 and the second straight monthly decline.

US consumers are finding it tougher to spend and that will be the message over the rest of 2008.

The 3.3% annual rate of growth in the second quarter is all well and good, but most analysts reckon the economy will slow to below 1% this quarter and in the fourth quarter.

That means the US dollar’s gains will be limited, although the Fed has said that its next rate rise will be up, not down. But if the economy slumped even more and inflation dropped, a rate cut could not be ruled out.

Comex December gold futures fell $US2 Friday to $US835.20 an ounce, leaving the metal down 9.% in August, but up a tint 0.2% for the week.

Comex silver futures for December delivery ended at $US13.707 an ounce Friday and was up 0.9% in the week. But they lost 22% in value in August, the biggest fall for four years.

Gold is down 0.3% this year, while silver has dropped 8.1%.

 

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Copper fell, capping the second straight monthly drop, as rising inventories signalled slowing demand.

London Metal Exchange Stockpiles climbed to a six-month high of 173,375 tonnes last week, up 57% since the end of April.

Copper prices in turn have fallen 21% from a record $4.2605 a pound on May 5.

Comex copper futures fell 1.35 cents, or 0.4%, to $US3.387 a pound on Friday to take the week’s fall to 2.1%.

Commodities slumped in August as the dollar rallied, eroding the appeal of raw materials as a hedge against inflation, but many traders are waiting to see what happens as industry in Europe and the US return after the summer holidays, and Chinese industry restarts after shutdowns around Beijing and other provinces because of the Olympics.

The International Copper Study Group said in a report Friday that global copper use increased only 0.2% in the five months to May 31.

That’s due to the slowdown in the US, Europe to a lesser extent and China.

LME three month copper eased $US20 to $US7,510 a tonne, or $US3.41 a pound. The price has gained just 2% so far this year.

 

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Crude oil was little changed as Tropical Storm Gustav approached the Gulf of Mexico.

Bloomberg reported that BP and Shell are finishing shutting oil and gas production platforms in the Gulf of Mexico and other companies are shutting pipelines as Hurricane Gustav gains strength and moves toward the region.

Bloomberg said Shell and BP aimed to complete the shutdown of the equivalent of 800,000 barrels a day of oil production by yesterday

The US Government said oil producers have shut at least 7%-8% of output in the Gulf of Mexico

Fields in the Gulf produce 1.3 million barrels a day of oil, about a quarter of US production, and 7.4 billion cubic feet a day of natural gas, 14%.

Prices climbed Friday by more than $US3 a barrel as Shell and BP said they will pull workers from Gulf platforms and shut production ahead of the storm’s expected arrival.

But October crude fell 13 cents to $US115.66 in New York on Friday, but will bounce around in Asian trading today and tomorrow because of Gustav’s presence. The US is on holiday tonight.

There are fears Gustav could emulate Katrina in 2005 which closed 95% of offshore output in the Gulf of Mexico and idled around 20% of US refining capacity.

BHP Billiton and Woodside have producing interests in the Gulf.