LONDON: Many global commodity markets fell this week as traders worried that the Cyprus situation would reignite the eurozone's sovereign debt crisis and dent global demand for raw materials. However, precious metal gold won ground as many investors sought a safe place to park their cash.
"Gold prices have firmed as events in Cyprus have unfolded this week, but the base metals complex and oil prices have come under pressure," said Barclays analyst Suki Cooper.
"A recovery in investor risk appetite is passing commodities markets by. The growth outlook is still not strong enough to support the kind of broad-based pick-up already seen in many other asset classes."
Cyprus is locked in emergency talks with a troika of lenders to save the eurozone member's banking system and economy in general from ruin, and the option of a tax on bank deposits back on the table.
The European Union has given Nicosia until Monday to raise 5.8 billion euros ($7.47 billion) to unlock loans worth 10 billion euros or face being choked from European Central Bank emergency funding in a move that would bankrupt the island.
OIL: World crude prices sank as fears intensified over Cyprus. The market also fell as traders banked profits despite strong manufacturing data in China, which is the world's biggest consumer of energy.
The European Central Bank warned on Thursday it was ready to pull the plug on emergency funding for Cyprus banks as the island's politicians scrambled to raise billions of euros to head off financial meltdown.
In another blow to sentiment, the eurozone Purchasing Managers' Index (PMI), published by London-based Markit, showed that the German economy was starting to be affected by the problems in the rest of Europe and that the French slowdown was accelerating.
Overall the eurozone PMI, a leading indicator of growth, fell to four-month low of 46.5 points in March against 47.9 in February.
"Concerns about demand for oil intensified following the release of disappointing eurozone PMI readings and after the ECB issued an ultimatum to Cyprus to come up with a bailout plan by Monday or else it would suspend its provision of emergency liquidity," said GFT analyst Fawad Razaqzada.
Prices had rallied in New York on Wednesday after the US Department of Energy reported an unexpected decline of 1.3 million barrels in oil stocks in the week ending March 15.
That confounded market expectations for a large gain of 1.7 million barrels, suggesting stronger-than-expected demand in the United States, which is the world's top crude consumer.
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