Commodities enjoyed a broad bounce on Tuesday, with crude rising back above $71 a barrel, as a weaker dollar lured investors back into the market and the US currency’s reserve status was questioned by Russia.
The S&P spot GSCI commodities index gained 1.1 per cent as the dollar fell against a basket of competitors. Dmitry Medvedev, the Russian president, had earlier called for the creation of new reserve currencies, comments which added to speculation over the future of the US dollar.
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Nymex July West Texas Intermediate, the US benchmark, gained 71 cents to $71.33, while ICE July Brent rose 84 cents to $71.08 a barrel. WTI has now gained 53 per cent since the start of April, with Brent rising by 48.6 per cent.
Elsewhere base metals were mostly stronger, with copper recovering from its sharp drop in the previous session to gain 0.6 per cent to $5036 per tonne. Zinc rose 1.8 per cent to $1590 per tonne, while aluminium was 1.4 per cent higher to $1628 per tonne.
“We are not daft enough to ignore the fact that China’s commodities futures markets are signalling that China’s base metals buying is likely to be materially softer in the next 1-2 months than the past 4-5 months,” said Michael J Jansen of JP Morgan.
“So while China in effect started the base metals rally in early 2009 it is no longer the key driving force. Accordingly those traders and investors that focus on the base metal outlook basis China’s demand might be overly negative on the complex in the short term, especially if risk markets can pause as opposed to retreating significantly.”
Spot gold prices also benefited from dollar weakness, rising 0.9 per cent to $936 per troy ounce.
Gold has risen sharply since the start of the year, at one point briefly rising above $1000 per troy ounce, on investor fears over increased inflation eroding the value of cash and other assets after government’s across world adopted unorthodox monetary policies and spent billions of dollars on stimulus packages and bail-out schemes.
