BBC World Service

Oil, gold, commodity prices take sharp fall

Andrew Walker May 6, 2011
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BBC World Service

Oil, gold, commodity prices take sharp fall

Andrew Walker May 6, 2011
HTML EMBED:
COPY

STEVE CHIOTAKIS: The price of oil is well below $100 a barrel today — a mark it had been above for weeks. Gold prices are off from their recent record highs. Even the price of cotton is down.

The BBC’s Andrew Walker is with us now from London to talk about why we’re seeing these drops in commodities. Hi Andrew.

ANDREW WALKER: Hi Steve.

CHIOTAKIS: So, what’s the deal with commodity prices, why are they dropping?

WALKER: Well, some people think it’s partly about fundamental economic things — so concerns about the strength of the global recovery. If it weakens that would undermine the demand for commodities such as oil and industrial metals. There are signs of weakness in U.S. that it might be faltering a little. And concern that higher inflation around the world might lead to central banks raising interest rates.

But some people in the markets, such as Alan Knuckman — senior strategist at Agora Financial in Chicago — think that prices had got ahead of themselves and were due to come down.

ALAN KNUCKMAN: The big 10 percent down movement in crude oil and silver were long overdue so you’re seeing a combination of factors that kind of gave them a bit of a knockdown. But I look at this as mainly profit taking.

In other words, some investors have been selling to cash on the prices rises.

CHIOTAKIS: Why, Andrew, are the prices that are dropping a problem if it costs less for consumers and companies that use these raw materials?

WALKER: Frankly for most people and firms I think it’s not a problem. The people who will be hit are the commodity suppliers, for example the OPEC oil producing countries, and maybe some investors who got into the market very late. But bear in mind with things like oil, the prices has only gone down to the level it was a couple of months ago. So no big losses just yet.

CHIOTAKIS: The BBC’s Andrew Walker in London. Andrew thanks.

WALKER: You’re welcome Steve.

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