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Commodity prices rocked by Ukraine fears, Fed outlook

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(Globalpost/GlobalPost)

Commodities faced choppy trade this week, with gold torn between concerns over the Ukraine crisis and the prospect of a US interest rate hike in mid-2015.

Gold forged a six-month pinnacle as investors sought a safe haven from the growing Ukraine fears, before pulling lower as the dollar strengthened.

Elsewhere, copper dived to a 3.5-year low on Chinese demand worries and coffee was dampened by the arrival of rain in Brazil, while cocoa zoomed to a 2.5-year peak on the back of stretched supplies, dealers said.

PRECIOUS METALS: Gold jumped to another six-month high at $1,392.22 per ounce on Monday, as investors sought shelter from Ukraine and also US economic woes.

"The gold rally this year has extended beyond what we expected, helped by weak weather-related US economic data and the ongoing crisis in Ukraine," said Societe Generale analysts.

Prices then sank on profit-taking, and as the dollar strengthened after the Federal Reserve hinted at an interest rate rise early next year.

Fed chair Janet Yellen indicated Wednesday that the US central bank could begin increasing its key federal funds interest rate about six months after it ends its stimulus.

With the asset-purchase programme likely to wrap up by year-end, Yellen's comments suggested to some that the Fed would raise its main rate in the first half of 2015. Expectations had been for an increase later in the year.

The stronger greenback makes dollar-priced commodities more expensive for buyers using weaker currencies, which tends to dampen demand and prices.

By late Friday on the London Bullion Market, the price of gold eased to $1,336 an ounce from $1,385 a week earlier.

Silver dipped to $20.55 an ounce from $21.36.

On the London Platinum and Palladium Market, platinum reversed to $1,439 an ounce from $1,478.

Palladium grew to $789 an ounce from $780.

BASE METALS: Base or industrial metals prices diverged but copper tumbled to the lowest level since July 2010 on demand fears in key consumer China.

"Copper hit its lowest level in more than 3.5 years ... down to a low of $6,321, with worries still about growth and tighter credit in China," said Triland Metals analysts.

By Friday on the London Metal Exchange, copper for delivery in three months rose to $6,508.50 a tonne from $6,469 week earlier.

Three-month aluminium dropped to $1,719 a tonne from $1,733.50.

Three-month lead advanced to $2,080 a tonne from $2,032.50.

Three-month tin fell to $22,967 a tonne from $23,000.

Three-month nickel increased to $15,955 a tonne from $15,921.

Three-month zinc slipped to $1,956 a tonne from $1,979.25.

- Oil faces volatile week -

OIL: Prices fell Monday as markets downplayed fears of disruptions to Western European energy supplies after Crimea voted in a disputed referendum to leave Ukraine and join Russia.

The European Union and the United States slapped sanctions on top Russians and Ukrainians deemed responsible for the breakaway vote on the Crimean peninsula that has fanned the worst East-West standoff since the Cold War.

US oil prices then surged Tuesday on news of a key pipeline expansion that will help to draw down bulging crude supplies at the Cushing depot.

New York crude extended gains on Wednesday after an inventory report showed supplies at the crucial Cushing trading hub fell 200,000 barrels to 29.8 million barrels last week. That compared with supplies of 49 million barrels a year earlier.

Prices tailed off Thursday as the dollar strengthened on raised expectations of a Fed rate hike sooner than previously thought.

Heading into the weekend on Friday, the market won back ground on resurgent concerns over Ukraine.

"The oil market is being driven higher by increased fears of a disruption in crude supplies following the expansion of US sanctions against Russia," said analysts at London-based brokerage PVM.

US President Barack Obama announced Thursday expanded sanctions against Russian officials, and minutes later the Kremlin struck back with travel bans against US officials and lawmakers.

Russia provides about a quarter of Europe's natural gas supplies, with a significant portion of that flowing through pipelines that cross Ukraine. Traders fear that an escalation of the crisis would disrupt those supplies.

By Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in May eased to $107.51 a barrel from $107.58 a week earlier for the April contract.

On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for April rose to $100.13 per barrel from $98.78.

- Coffee slumps; cocoa soars -

COFFEE: Prices fell sharply from recent heights, hitting three-week lows as traders banked profits and eyed predictions of heavy rains in key producer Brazil.

"The price slide is likely to have been triggered by forecasts of more rainfall in Brazil, the drought there having previously facilitated the massive price rally," said Commerzbank analysts.

"We hold profit-taking mainly responsible for the slump, however, because the estimates of possible crop shortfalls in Brazil -- and the optimism they sparked -- are likely to have been unrealistically high."

Since the start of the year, concerns about Brazilian coffee supplies have propelled Arabica coffee prices by about 90 percent in value.

By Friday on the ICE Futures US exchange, Arabica for delivery in May tumbled to 174.05 US cents a pound from 203.75 cents a week earlier.

On LIFFE, London's futures exchange, Robusta for May sank to $2,034 a tonne from $2,176.

COCOA: Cocoa soared to 2.5-year highs on fears over keen demand and limited world supplies of the commodity that is mostly used to make chocolate.

Cocoa hit £1,902 a tonne in London and $3,039 a tonne in New York, the highest points since September 2011.

"The main crop harvest is about over now, and the demand reports are solid, so prices can continue to work higher in the short term," said Price Futures Group analyst Jack Scoville.

"Demand is strong as the Easter holiday is coming soon. Asian demand has been strong and Indonesia is importing beans for processing.

By Friday on LIFFE, cocoa for delivery in May grew to £1,889 a tonne from £1,879 a week earlier.

On ICE Futures US, cocoa for May eased to $2,985 a tonne from $3,006.

SUGAR: Prices continued to push lower on easing concerns over dry weather in Brazil.

By Friday on LIFFE, the price of a tonne of white sugar for delivery in May decreased to $453 from $460.70 a week earlier.

On ICE Futures US, the price of unrefined sugar for delivery in May fell to 16.98 US cents a pound from 17.59 US cents.

RUBBER: Prices in Kuala Lumpur declined on weak demand and high stockpiles in China and Japan, and amid the poor global economic backdrop.

The Malaysian Rubber Board's benchmark SMR20 fell to 190.95 US cents a kilo from 197.35 cents last week.

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