SINGAPORE — Commodities from gold to grains and crude rose on Wednesday, as stock markets rebounded on hopes that Japan and the United States would cut interest rates, but the spectre of waning demand continued to nag investors.
Crude oil snapped a three-day losing streak to stand above $64 (U.S.) a barrel, London copper futures gained half a per cent, and gold brightened more than 1 per cent as the surge in Asian equity markets spurred investors to flock back to commodities.
But analysts warned of more bad news ahead, with the economic picture set to deteriorate and demand slacken for grains and base metals.
Oil and other commodities have tracked stock markets closely in recent months as investors divide assets into safe-haven and risky ones, switching between the two to protect themselves from the whiplash of the worst financial crisis in 80 years.
“I don't think we've seen the end of fund liquidation,” said Antoine Halff, an analyst at Newedge Group.
“Also, there are a lot of bad economic indicators we are just starting to see. Unemployment (in the U.S.) is going to go up. There are all kinds of pressure points and various economic signals on the horizon.”
U.S. consumer confidence suffered its steepest monthly drop on record in October, with economists expecting U.S. GDP figures due on Thursday to show a decline of 0.5 per cent in the July-September quarter. Many see that as the start of a nine-month contraction, or perhaps longer.
U.S. light crude for December delivery was up $1.67 at $64.40 a barrel by 0447 GMT, after an earlier session high of $66.71. Prices had slumped by $5 over the past three sessions, settling on Tuesday at their lowest in 17 months.
Asia-Pacific stocks outside Japan climbed 2.3 per cent after touching a four-year low on Tuesday, while Japan's Nikkei ended up 7.7 per cent on signals that the Bank of Japan might cut interest rates at a policy-setting meeting this week, after a likely Federal Reserve cut later on Wednesday.
London Metal Exchange copper for delivery in three months added 0.5 per cent to $4,150 a tonne by 0455 GMT after jumping 2.2 per cent on Tuesday. Aluminum rose $15 or 0.7 per cent to $2,120.
But a return of negative sentiment in equities and slowing demand growth and even recession meant metals would face a difficult year ahead, said David Moore, a commodities strategist at Commonwealth Bank in Sydney.
“Supply-side adjustments are occurring, particularly zinc and aluminium, but the near-term focus remains on the weakness in demand,” he added. “However, these adjustments will provide a base for prices further in the future.”
By 0704 GMT, gold was up 0.7 per cent at $749.90 an ounce over New York's notional close on Tuesday, when it gained more than 1 per cent.
Heightened demand worries after U.S. auto retailers swung to third quarter losses drove platinum to stand down 4 per cent, at $775.50 an ounce, from New York's notional close.
U.S. soybeans rose 2.8 per cent, with wheat and corn up around 2 per cent, as traders took the view that markets had been oversold when fears that a prolonged global recession would curb demand took hold last week.
Doug Whitehead, a soft commodities strategist at ANZ Banking Group Ltd, said prices remained volatile with selling expected into any near-term highs as commodities markets were still being driven by the macro-economic environment.
“I think this recovery rally which we're seeing at the moment is not going to carry through for any length of time,” he said.
