Oil, gold prices fell but copper rises

Crude oil prices fell on Friday as traders speculated about whether China may impose more restrictions to control the growth of its economy, and looked for more signs that the US economy is headed for better days.

Benchmark oil for March delivery fell 48 cents to settle at $US89.11 a barrel on the New York Mercantile Exchange.

Oil and other commodities have taken a hit from news that China's economy defied expectations to speed up in the fourth quarter while inflation remained elevated.

Traders speculated that means China's government will take further measures to control cost of living increases. China has had a robust appetite for commodities from oil to soybeans as its economy has boomed in the past year.

Oil prices were restrained by the Energy Department's weekly report that showed growing US stockpiles of oil, gasoline and distillates, which include heating oil and diesel fuel. All are higher than the five-year average, an indication that energy demand remains tepid.

In other Nymex trading, heating oil rose 2.76 cents to settle at $US2.6508 a gallon, and gasoline added 3.64 cents to settle at $US2.4589 a gallon. Natural gas for March delivery gained 5.1 cents to settle at $US4.743 per 1,000 cubic feet.

In London, Brent crude rose $1.02 to settle at $US97.60 a barrel on the ICE futures exchange.

PRECIOUS METALS

Gold prices fell for a second day on Friday as a stronger appetite for riskier assets such as equities and an improving economic outlook diminished safe-haven buying, more than offsetting a weaker dollar.

Bullion notched a third consecutive weekly loss, its longest since July, and that called into question the metal's lengthy bull run due to signs that the economic recovery is taking hold and as fears about an European debt crisis have subsided for now.

Spot gold fell 0.2 per cent to $1,343 an ounce by 2 pm EST (1900 GMT). US gold futures for February delivery settled down $5.50 at $1,341 an ounce.

Bullion hit a low of $1,337.50, their weakest price since Nov 18, as financial markets opened in New York. US traders cited an increase in margin requirements for precious metals futures as a reason for the decline.

Silver inched up 0.2 per cent to $27.53 an ounce.

The gold-to-silver ratio - the number of ounces of silver needed to buy an ounce of gold - rose back towards 50, its highest level since late November, as some traders believed gold is becoming increasingly expensive relative to silver.

Friday's turnover was modest as COMEX gold and silver futures volumes on the New York Mercantile Exchange were largely in line with their 30-day averages.

Gold's slide was limited on Friday by a retreat in the dollar to two-month lows versus the euro, with the European single currency reaching its highest level since late November, helped by improving confidence in region.

Silver prices had earlier hit a seven-week low at $27.10 an ounce, pressured by a further outflows from the world's largest silver-backed exchange-traded fund, the iShares Silver Trust.

Holdings of the trust fell by just over 10 tonnes on Thursday, after recording their biggest one-day drop since late November in the previous session. It has seen outflows of more than 346 tonnes so far this year.

Investment demand was a major driver in silver's price gains of more than 80 per cent last year.

Platinum rose 0.8 per cent to $1,822.24 an ounce, while palladium climbed 1.4 per cent to $819.50.

INDUSTRIAL METALS

Copper bounced nearly one per cent on Friday, snapping a two-day slide that dragged prices to their lowest level in a month, as the dollar weakened and on worries about more monetary tightening in top-consumer China abated.

Copper prices - down as much as five per cent from all-time record peaks at $9,781 per tonne in London this week and $4.4980 per lb in New York earlier this month - found their footing on Friday, as investors reassessed global demand prospects for the industrial metal.

London Metals Exchange (LME) copper for three-month delivery rose $86, or 0.92 per cent, to end at $9,441 a tonne.

COMEX March copper firmed 3.70 cents to settle at $4.3090 per lb.

Copper also benefited from a weaker US dollar, which fell to a two-month low against the euro amid improving confidence in the euro zone.

A weaker US currency makes dollar-priced commodities more affordable for holders of other currencies.

One area where substitution could increase is air conditioning, with aluminium piping replacing copper.

Aluminium stocks jumped by 64,000 tonnes to 4,550,325 tonnes, up by more than six per cent so far this year alone.

Lead stocks last fell 175 tonnes to 264,175 tonnes, after touching their highest level since May 1995 on Wednesday.

The backwardation on lead - a premium for cash material over the three-month contract - rocketed to $80 a tonne, its highest since October 2007. This compared with a backwardation of $31 earlier this week.

Data on Friday continued to show a dominant position controlling 80 to 90 per cent of the stock warrants and cash contracts on LME lead.

Lead closed down $12 at $2,425 a tonne.

Tin rose to touch a record of $27,750 as investors focused on supply deficit expectations and the weaker dollar. The metal climbed $845 to end at $27,745.

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