Gold Set to Rebound as Paris Terrorist Attacks Spur Haven Demand

  • Bloomberg Commodity Index fell to five-year low on Friday
  • Market signs point to stronger dollar: Oman's Scacciavillani

Gold is set to rebound from a five-year low on Monday while other commodities keep trading on their own fundamentals as the terrorist attacks in Paris won’t change much for global supply and demand of raw materials from copper to coffee.

That’s the outlook from Eugen Weinberg of Commerzbank AG, Fabio Scacciavillani of Oman Investment Fund, and Edward Bell of Dubai-based bank Emirates NBD PJSC for commodities Monday after terrorist attacks in Paris on Friday.

“The implication for the oil market is limited, with the possibility of lower demand at least outweighed by higher geopolitical tensions,” Weinberg, head of commodities research at Commerzbank, said by phone from Frankfurt on Sunday. “As for gold, I wouldn’t be surprised to see at least a short-term positive reaction on the back of higher risk aversion.”

The Bloomberg Commodity Index of 22 raw materials slumped 0.5 percent on Friday to 82.4332, the lowest settlement since July 21, 1999, with oil futures extending declines after an industry report showed American drillers put rigs back to work. Gold futures closed at $1,080.90 an ounce last week, the lowest close since February 2010. A return to $1,100 is possible, Weinberg said.

Teams of Islamic State-backed gunmen killed 129 people in several sites across the French capital, which President Francois Hollande called an "act of war." Selloffs in commodities after the bombings that killed 191 people on Madrid commuter trains in March 2004 and left more than 50 dead in London in July 2005 were erased days or weeks later.

Gold may get a boost as a haven while for most commodities, “there’s no fundamental reason for a prolonged weakness” due to the terrorist attacks, according to Scacciavillani, chief economist of the Oman Investment Fund, in an interview in Dubai on Sunday. “Markets were already weak on Friday. Market signs point to a stronger dollar and weaker euro as the Federal Reserve looks to raise interest rates and the European Central Bank prepares for more monetary easing.”

Commodities dropped 21 percent this year, heading for the fifth consecutive yearly decline, as supplies overwhelmed demand for everything from crude oil to aluminum. Prices of aluminum, which have dropped 20 percent this year, will keep falling for the fourth quarter, Abdulaziz al-Harbi, president of Saudi Arabian Mining Co.’s aluminum joint venture with Alcoa Inc., told a conference in Dammam, Saudi Arabia, on Sunday.

Gold could be the exception among commodities as investors shift away from assets perceived as risky, Bell, a commodities analyst at Emirates NBD, said by phone Sunday.

“We may see a general shift to safe-haven type assets,” he said.

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