Commodity prices rallied this week as the US Federal Reserves decision to pump more than a trillion dollars into the ailing American economy weakened the greenback, leaving investors to seek out havens. "The Feds decision to move to quantitative easing by signalling that it will begin to purchase government bonds has led to a strong rally in commodity prices," said Lee Hardman, economist at The Bank of Tokyo-Mitsubishi UFJ in London.
The US central bank on Wednesday ramped up its battle against the economic crisis by announcing plans to pump another 1.15 trillion dollars into the financial system in a stepped-up effort to spark recovery. In reaction, investors have sold off the dollar on fears the move will make US assets less attractive. This has benefited raw materials, notably gold, seen as a haven in times of economic troubles.
OIL: Crude oil prices bounced above 52 dollars a barrel this week on the Feds latest bid to lift the worlds biggest energy consuming nation out of recession, traders said.
New Yorks light sweet crude rallied to 52.25 dollars a barrel - the highest level since November 28 last year - after topping 50 dollars for the first time in four months on Thursday. "A wave of bullish sentiment swept the markets... as various measures announced by the Fed helped to support prices across the commodity markets," Barclays Capital analysts said in a note to clients.
A weaker greenback also boosted oil prices because it makes dollar-priced crude cheaper for buyers using stronger currencies. At the start of the week, prices had fallen on lingering disappointment over Opecs decision to hold current production levels amid a spreading global recession, dealers said.
The Organisation of the Petroleum Exporting Countries opted Sunday in Vienna to leave members production quotas unchanged - and blamed the global economic slowdown for the decision. The 12-nation cartel explained it wanted to concentrate on compliance with reductions in output quotas decided in the final months of 2008, which represented a cut since September of a combined 4.2 million barrels a day.
Opec chose to delay any decision and called an extraordinary meeting for May 28, when ministers will reconvene in the Austrian capital to assess the market situation. The market was weighed down on Wednesday by news of a larger-than-expected increase in US energy reserves that highlighted weak American energy demand, but trimmed losses on news of the Fed stimulus plan.
By Friday on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in May jumped to 51.77 dollars a barrel from 47.44 dollars a week earlier, when the most traded contract was April. On Londons InterContinental Exchange (ICE), Brent North Sea crude for May jumped to 50.76 dollars a barrel from 45.79 dollars a barrel a week earlier.
PRECIOUS METALS: Gold rose sharply, in turn lending a boost to sister metal silver. "We expect the market to remain robust as long as economic and financial risks remain paramount," said Citigroup analyst Liam Fitzpatrick. By late Friday on the London Bullion Market, gold stood at 958.30 dollars an ounce compared to 930.04 dollars reached a week earlier.
Silver advanced to 13.65 dollars an ounce from 13.11 dollars. On the London Platinum and Palladium Market, platinum rose to 1,100 dollars an ounce at the late fixing on Friday from 1,048 dollars a week earlier. Palladium gained to 206 dollars an ounce from 198 dollars.
BASE METALS: Base metals prices mainly advanced, with copper striking a four-month high as it briefly bounced back above 4,000 dollars a tonne prior to profit-taking. "The metals were largely bullish... with the weaker dollar the main driving force," said Basemetal.com analyst William Adams.
"Also the Feds quantitative easing stance provided some hope for growth as it suggested they would continue to do what was necessary to encourage growth and avoid deflation." By Friday on the London Metal Exchange, copper for delivery in three months stood at 3,959 dollars a tonne from 3,690 dollars the previous week.
-- Three-month aluminium rose to 1,469 dollars a tonne from 1,375 dollars.
-- Three-month lead gained to 1,310 dollars a tonne from 1,240 dollars.
-- Three-month tin fell to 10,257 dollars a tonne from 10,452 dollars.
-- Three-month zinc climbed to 1,254 dollars a tonne from 1,225 dollars.
-- Three-month nickel rallied to 9,961 dollars a tonne from 9,455 dollars.
COCOA: Cocoa prices extended gains. By Friday on Liffe, Londons futures exchange, the price of cocoa for delivery in May increased to 1,921 pounds a tonne from 1,888 pounds a week earlier. On the New York Board of Trade (NYBOT), the May cocoa contract rose to 2,588 dollars a tonne from 2,425 dollars.
COFFEE: Coffee prices rallied. By Friday on Liffe, Robusta for delivery in May advanced to 1,572 dollars a tonne from 1,560 dollars a week earlier. On the NYBOT, Arabica for May jumped to 116.55 US cents a pound from 111.30 cents.
GRAINS AND SOYA: Grains and soya prices advanced. "The main driver this week has been the sharp decline of the US dollar," said Doane Advisory Services analyst Bill Nelson. By Friday on the Chicago Board of Trade, maize for delivery in May jumped to 3.96 dollars a bushel from 3.88 dollars the previous week. May-dated soyabean meal - used in animal feed - rallied to 9.45 dollars from 8.76 dollars. Wheat for May increased to 5.52 dollars a bushel from 5.18 dollars.
SUGAR: Sugar prices struck seven-month highs of 407 pounds a tonne in London.