Commodities rise on market rally

MARKETS rallied last night after China denied reports it was considering a reduction in its European bond holdings, easing fears the European debt crisis could undermine the global economic recovery.

Along with US President Barack Obama's call to restrict offshore drilling, the news sent oil prices soaring.

"The trigger behind this sudden spike in risk appetite largely centred on China's vote of confidence in eurozone assets following prior reports that the country may be reducing exposure to the eurozone," Reuters quoted Ritterbusch & Associates president Jim Ritterbusch as saying.

Meanwhile, Vantage Trading spokesperson Tim Jennings told Dow Jones Newswires that the US moratorium was unlikely to have a major effect on the country's oil production in the short term and that the market was looking for a reason to rally.

Oil was also boosted by the US Energy Information Administration noting products supplied over the previous four-week period rose 6.9%, the highest level since last January, while the National Oceanic and Atmospheric Administration said it expected the 2010 Atlantic hurricane season to be the most intense since 2005, when hurricanes Katrina and Rita caused major disruption to oil production and refineries in the US.

Singapore's Tapis crude closed up from $US75.10 per barrel on Wednesday to $76.92/bbl last night.

Despite a roller-coaster week for global markets, in London overnight copper managed to close more than $100 higher than last Friday's close.

Copper jumped 3% overnight to $6955 per tonne.

An unnamed Hong Kong-based trader told Dow Jones that the jump in LME metals overnight looked sustainable.

"It seems like a turnaround market today from a very bearish picture earlier," he said.

The firming in commodities overnight, as well as a strong session on Wall Street, hindered any further gains in the gold price, but the precious metal still looks set to finish the week stronger than it began.

Both spot and Comex gold finished at $1176 per ounce last Friday, and Comex gold closed at $1211.90/oz overnight while spot gold was last trading at $1208.80/oz.

Analysts believe gold will remain strong on the back of safe haven purchases until there is more certainty in global markets.

"The longer term trend in gold remains intact," broker and futures analyst Michael Gross told Dow Jones.

"You still have longer term buying going on."


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