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Last Updated: Friday, 21 April 2006, 11:27 GMT 12:27 UK
Commodity surge runs out of steam
Traders take a break on the floor
Investors warned that any pause for breath is likely to be temporary
Commodity prices have dropped on Friday, halting the recent powerful surge that set new records for the price of crude oil, gold and silver.

In London, Brent crude oil shed 0.7% to $72.70. Silver fell for a second day, taking declines over two sessions to 15%. Gold was well below its $645 high.

However, analysts said any dip in prices may be short-lived as supply worries persist especially in the US.

Also causing concern is an escalating diplomatic row between the US and Iran.

"The pullback appears to be due to profit-taking, which is not surprising considering prices have really surged in the past few days," said Victor Shum, an analyst at Purvin & Gertz.

"The decline will not be large because the Iranian issue is keeping a high floor under prices."

I'm inclined to think it's not reached a peak yet
Tobin Gorey, Commonwealth Bank of Australia

The volatility of the commodity market was reflected in New York, where a barrel of light sweet crude rose 1.1% to $73.05.

A report earlier this week in the US showed that gasoline stockpiles were less than many analysts had predicted in the lead-up to the busy summer driving season.

'More to come'

Commodities have been this year's hot performers, prompting merchant banks to launch many new funds that specialise exclusively in metals and oil.

Underpinning the gains has been the rapid economic growth in nations such as China and India, as well as an inability by the main producer nations to meet the increased demand.

While many of these problems have been addressed, it will take time for them to be completely rectified.

In the meantime global political instability is fanning investor concerns and is likely to keep prices high.

"I'm inclined to think it's not reached a peak yet," said Tobin Gorey of the Commonwealth Bank of Australia.

"We're still faced with a tight supply-demand equation against the backdrop of strong economic growth...traders are not relenting on their worries of Iran," he explained.

"There's still more money to come into the market."

Price pressure

In London, Brent crude oil shed 0.7% to $72.70. Earlier this week it had climbed as high as $74.22.

Silver lost 1.8% to $12.30, after rising as high as $14.52 on Thursday.

Gold was trading at between $613.40 and $615.20, down from Thursday's high of $645.

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