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Friday, December 15, 2017

A month of record highs and lows: gold, oil, dollar, ship prices …

On 13 March 2008 the Financial Times reported that gold prices had hit a record of
USD 1,000 a troy ounce as investors sought refuge from the weakening U.S. dollar. Precious metal analysts warned that further prices rise were likely if the weakness of the dollar continued. Tobias Merath, head of commodity research at Credit Suisse in Zurich, said that the combination of dollar weakness, negative real interest rates and surging inflation was "the ideal environment for rising gold prices".

 

The surge came as the dollar slumped to a record low against the Swiss franc and the Euro on Thursday and hit its weakest level in 12 years against the Yen amid growing concerns over the health of the U.S. economy. The dollar fell to new lows across the board - JPY 99.8 to the dollar, USD 1.56 to the Euro, USD 2.0 to the pound and USD 1.007 to the Swiss Franc.

 

The rise in gold prices was mirrored in the crude oil market, which hit fresh highs as West Texas Intermediate rose to USD 110.94 a barrel and Brent hit USD 107.55 a barrel - also a new record. Stephen Walker, director of global mining research at RBC Capital Markets, said bullion was pushing into new territory. Long-term trends that should help support gold prices above USD 1,000 included declining mine production, growing demand from increasingly affluent populations in emerging markets, and investors continuing to seek hard assets as global inflationary pressures rise.

 

 

 In tanker shipping we had record freight rates in December and record ship prices in March.

 

 

 Tanker prices (USD million)

 

Resale**

New

5 year old**

10 years old**

15 years old**

VLCC*

165

150.5

140+

115

 

Suezmax

102

93.5

102

96

94

Aframax

80

76

70

59

25

Panamax

 

 

62

50

12

Handy

 

52

53

44

32

 

VLCC*

*300,000 dwt - ** 310,000 dwt - *** 250,000 dwt

Suezmax

*150,000 dwt - ** 160,000 dwt - *** 150,000 dwt

Aframax

*110,000 dwt - ** 105,000 dwt - *** 95-97,000 dwt

Panamax

*NA- ** 70,000 - *** 65,000 dwt

Handy

*47,000 dwt - ** 45,000 dwt - *** 45,000 dwt

Source: Clarkson

 

In March we also witnessed the first scrapping of VLCCs in three years, and the prices were record high.

 

 

 

2008 - reflects sales for demolition in 1Q08 and prices end March.

 

So what are all these records leading to? One likely outcome is increasing inflation. End user prices eventually have to reflect the increasing costs of transportation and raw materials.

 

Contact: Erik Ranheim