Commodity prices rallied to multi-month highs this week on increasing signs that the worst of the world recession may be over. "The recent surge in commodity prices appears to have been driven primarily by hopes of a strong recovery in the global economy," said Capital Economics analyst Julian Jessop.
"However, there are still many reasons to be cautious. For a start, although some commodity firms have undoubtedly taken advantage of lower prices to rebuild stocks in anticipation of a pick-up in final demand, that increase in demand has yet to materialise," he cautioned.
OIL: New York crude oil hit 70 dollars for the first time in seven months on Friday as the dollar slid on news of a dramatic slowdown in US job losses, traders said. New York crude spiked to 70.32 dollars a barrel, the highest level since November 4. It later retreated sharply as the dollar recovered. "This initial rally in crude looks to have failed," aided by a recovering dollar, said Adam Klopfenstein, senior market strategist at Lind-Waldock.
A struggling US currency makes dollar-priced crude cheaper for buyers holding stronger currencies, in turn stimulating demand and pushing up prices. When the dollar strengthens the reverse tends to apply. The US unemployment rate meanwhile surged to a 26-year high of 9.4 percent in May, while the number of job losses slowed to a better-than-expected 345,000, government data showed Friday.
The Labor Department monthly report, seen as one of the best indicators of economic momentum, offered conflicting signals about a weak labour market, but suggested that the pace of massive job cuts appeared to be easing. The number of nonfarm jobs shed in the economy was much lower than the 520,000 expected and better than the revised figure of 504,000 in April. It was also about half the monthly decline of the past six months.
Oil prices have experienced a roller-coaster week in reaction to movements in the dollar, US inventory data and predictions made about crude futures. Prices slumped on Wednesday after a surprise jump in American crude reserves that indicated weaker-than-expected demand. The US Department of Energy announced Wednesday that American crude oil inventories leapt 2.9 million barrels in the week ending May 29 to reach 366 million barrels. Most analysts had expected a 1.7-million-barrel drop.
Crude futures rebounded strongly on Thursday after US investment bank Goldman Sachs said crude futures could strike 85 dollars a barrel by the end of 2009. "Crude's ability to completely deny... (Wednesday's) sharp sell off, strongly underscores the new found optimism in the energy complex," said ODL Securities analyst Marius Paun.
Goldman Sachs said its bullish price forecast stemmed from a global economic recovery and energy shortage. Further ahead, Goldman predicted that prices could strike 95 dollars a barrel by the end of 2010. After plunging from record highs above 147 dollars last July on supply concerns, oil prices touched multi-year lows in December, at one point nearing 32 dollars a barrel, as the economic slowdown crushed demand for energy.
By Friday, on the New York Mercantile Exchange (NYMEX), light sweet crude for delivery in July jumped to 67.97 dollars a barrel from 65.94 dollars a week earlier. On London's InterContinental Exchange (ICE), Brent North Sea crude for July climbed to 67.76 dollars a barrel from 65.05 dollars a week earlier.
PRECIOUS METALS: Gold prices approached 1,000 dollars an ounce before traders cashed in their gains late on. "Gold gained... as the dollar weakened after positive US macroeconomic data releases," said analysts at Barclays Capital. By late Friday on the London Bullion Market, gold fell to 962 dollars an ounce from 975.50 dollars a week earlier.
Silver rose to 15.65 dollars an ounce from 15.52 dollars. On the London Platinum and Palladium Market, platinum climbed to 1,275 dollars an ounce at the late fixing on Friday from 1,175 dollars. Palladium jumped to 257 dollars an ounce from 236 dollars.
BASE METALS: Base metals prices struck multi-month highs after data showed a pick-up in Chinese manufacturing, traders said. Copper reached 5,145 dollars a tonne in London trade - the highest level since October. China's manufacturing activity expanded in May for the third month running, official data showed on Monday, the latest tentative sign of economic recovery.
The official Purchasing Managers' Index, or PMI, for the manufacturing sector pulled back slightly to 53.1 in May, down from 53.5 in April, the China Federation of Logistics and Purchasing said in a statement on its website. A reading above 50 means the sector is expanding, while a reading below 50 indicates an overall decline. By Friday on the London Metal Exchange, copper for delivery in three months climbed to 5,055 dollars a tonne from 4,790 dollars a week earlier.
-- Three-month aluminium gained to 1,588 dollars a tonne from 1,423 dollars.
-- Three-month lead rose to 1,665 dollars a tonne from 1,530 dollars.
-- Three-month tin grew to 14,560 dollars a tonne from 14,100 dollars.
-- Three-month zinc increased to 1,576 dollars a tonne from 1,540 dollars.
-- Three-month nickel advanced to 14,721 dollars a tonne from 13,727 dollars.
COCOA: Cocoa prices extended recent gains. By Friday on Liffe, London's futures exchange, the price of cocoa for delivery in September stood at 1,770 pounds a tonne compared to 1,715 pounds for the now-expired July contract a week earlier. On the New York Board of Trade (NYBOT), the September cocoa contract increased to 2,736 dollars a tonne from 2,613 dollars for the July contract.
COFFEE: Coffee prices touched the highest points for a number of months before pulling back on profit-taking. By Friday on Liffe, Robusta for delivery in July grew to 1,538 dollars a tonne from 1,519 dollars a week earlier. On the NYBOT, Arabica for July fell to 135.40 US cents a pound from 136.90 cents.
GRAINS AND SOYA: Soya and grains prices traded mixed. By Friday on the Chicago Board of Trade, maize for delivery in July rose to 4.45 dollars a bushel from 4.36 dollars a week earlier. July-dated soyabean meal - used in animal feed - increased to 12.29 dollars from 11.84 dollars. Wheat for July fell to 6.28 dollars a bushel from 6.37 dollars.
SUGAR: Sugar prices reached three-year highs in London before investors banked profits. Sugar prices have soared since the start of the year in the wake of a poor Indian harvest that has dented supplies after years of overproduction. By Friday on Liffe, the price of a tonne of white sugar for delivery in August dropped to 445 pounds from 453 pounds a week earlier. On NYBOT, the price of unrefined sugar for July retreated to 15.41 US cents a pound from 15.68 cents.
RUBBER: Malaysian rubber prices advanced in quiet trade. On Friday, the Malaysian Rubber Board's benchmark SMR20 rose to 163.60 US cents a kilo from 160.50 US cents a week earlier.