Oil steadied on Thursday after falling more than 3 percent, lifting gold prices, but a firm U.S. dollar threatened to trigger another round of selling in a wide range of commodities from soybeans to base metals.
Some commodities may have moved up too fast, analysts said, with oil rising 30 percent in May and hitting a seven-month high of $69.05 a barrel on Tuesday before profit-taking kicked in. London copper slipped after a rally to a 7-½ month high above $5,000 this week.
"I think we are getting quite a bit of speculative flows into oil and the builds in crude oil inventory, as shown in the U.S. energy report, just bring the markets back to reality," said Adrian Koh, analyst at Phillip Futures in Singapore.
"Basically the markets are overbought and facing profit-taking pressures. If we do get about the bout of selling in commodities and buying in dollars, then the direction could change a bit," he added.
Oil hit an intraday high of $66.44 a barrel, having fallen 3.5 percent the previous day on expectations an economic recovery could eventually draw down oil inventories in the world's largest consumer. [O/R]
The U.S. Energy Information Administration reported U.S. crude inventories rose 2.9 million barrels, against expectations for a decline of 1.4 million barrels in a Reuters poll.
Other commodities often track oil because the energy markets reflect the state of the global economy.
The Reuters-Jefferies CRB index <.CRB> of 19 commodity futures, which includes everything from soybeans to cattle to crude oil, ended down nearly 3 percent at 253.05 on Wednesday -- after hitting a 6-1/2-month high this week.
Gold edged up to around $966 an ounce as investors bought back the metal after a round of profit taking the previous day blamed on falling oil prices and a rally in the dollar.
The dollar mostly held its ground on Thursday, after bouncing more than 1 percent from 2009 lows against a basket of currencies, on comments from Asian monetary officials and weaker-than-expected U.S. data that took the wind out of a risk rally in other major currencies. [USD/]
Gold struck a three month high at $989.80 on June 3 -- around 1 percent below an 11-month high above $1,000 hit in February. Inflation worries and the dollar's weakness have supported a bullish view on gold, while bears said short-term funds were driving up the market so any gains would not last long. [ID:nT253112]
Among industrial metals, Shanghai copper fell 3.3 percent while London prices stretched losses to a third day on Thursday, on a firmer dollar and after data showed half a million U.S. private jobs losses in May. [MET/L]
"Over the next few months there is a risk that data is not seen supporting a V-shaped recovery view," said David Moore, commodities strategist at Commonwealth Bank of Australia. "And in that case the market becomes disappointed about the economic outlook and potential for recovery for metals demand and prices fall back for a while."
U.S. soybean futures rose almost 1 percent after sharp losses in the previous session ignited investor buying amid concerns over tight old-crop supplies. Wheat also firmed, but its gains were damped by ample supplies on the international market. [GRA/]
The strong U.S. dollar knocked down commodity markets across the board on Wednesday, with wheat registering a near 8 percent decline, soybeans 2.2 percent and corn 3.8 percent.
