UPDATED: 12:25, Jan 12, 2006
The price of a barrel of crude oil touched US$100 for the first time, while the spot price of an ounce of gold shot to US$860.10, surpassing the previous record of US$850 reached in January, 1980.
Oil's rise in particular flew in the face of continued worries about a possible slowdown in the world's largest economy.
"We have this persistent strength in commodity prices even when it's becoming more and more apparent recession risks are mounting in the U.S. economy," said Douglas Porter, BMO Capital Markets deputy chief economist.
The price of oil rose about 4% on its record-breaking day on the New York Mercantile Exchange, conquering the century mark just after noon, Eastern time. Short-term reasons for the rise include recent political violence in Nigeria.
But over the long term, it's expectations of strong demand from emerging economies that will hold up oil prices, some economists say.
Earlier in the day, gold jumped 3% to peak at US$860.10 an ounce on the London spot market.
"Gold is now showing some mettle," said Ross Norman, who runs thebulliondesk.com, in a telephone interview from his office in London.
The price of the precious metal rose throughout December, even as some investors sold their positions for yearend profit-taking, Mr. Norman said. However, now that those fourth-quarter profits are booked, the market is no longer constrained by such selling.
Canadian gold-mining stocks reacted positively to the commodity's record-breaking surge, with several posting percentage gains in the double digits. Barrick Gold Corp. jumped almost 10% on the Toronto Stock Exchange.
Gold is often seen as a surrogate for the U.S. dollar, and investors tend to seek refuge in the precious metal when the greenback falls.
The price of gold could peak at US$1,200 an ounce this year, Mr. Norman said.
Production from the world's biggest producer, South Africa, has sunk to levels not seen since the 1930s, he said, and despite a long-standing bull run for the price of gold, a finite supply of the precious metal means not enough is being produced to meet demand.
"Demand is driving this inexorably," Mr. Norman said. "People talk about peak oil, but peak gold should also be a feature of discussion in 2008."
Meanwhile, the Institute for Supply Management in the United States said its factory index (which measures factory production) fell to 47.7 in December from 50.8 in November.
That figure missed economists' predictions and marked the lowest reading since April, 2003. A figure below 50 points is generally seen by economists as a sign of weakness ahead in the U.S. economy...
Source: Financial Post