Gold, copper lead broad rally on dovish Fed signals
SINGAPORE (July 11) Commodities surged across the board on Thursday, led by gains in copper and gold, as signals from the Federal Reserve that it may maintain its economic stimulus longer than previously expected revived the appetite for riskier assets.
Gold and copper prices jumped about 3% to their best in weeks, while oil hit multi-month highs and rubber climbed 5% after minutes from the Fed's June meeting showed many among the policymakers wanted more signs the US job market was improving before cutting bond purchases.
Fed chairman Ben Bernanke said separately that the US central bank would continue to pursue an accommodative monetary policy given tame inflation and a fragile labour market, pressuring the dollar and making commodities priced in the greenback cheaper for holders of other currencies.
"The Fed minutes stabilised markets, then we really took off when Bernanke spoke - he sounded more dovish than the minutes," said INTL FC Stone analyst Ed Meir.
"It's swinging the pendulum from an imminent cessation of easing to one where we're not sure if he's going to pull the trigger in September."
Gold led the rally early in Asia as investors bought back the precious metal which has been hammered by fears the Fed would soon cut back on its monthly $85-billion bond purchases. Gold's price peaks in recent years had been driven by the easy US monetary policy as investors hedged against inflation.
Spot gold climbed 2.7% to peak at $1 298.36 an ounce, a two-and-a-half week high, before cutting gains to $1 284.61 by 07:15 GMT, still up 1.7%.
Spot silver rose nearly 5% to $20.26 an ounce, while platinum and palladium also scaled higher.
US gold futures gained 4% and silver futures rose as much as 5.7%.
With physical demand in top gold markets India and China remaining subdued, analysts were sceptical about the current upward momentum being sustained.
"We are likely to see a short-term rally in gold up to around $1 400 and then a fall back to current levels," said Amber MacKinnon, an analyst at Nomura Securities in Sydney.
OIL EXTENDS GAINS
Three-month copper on the London Metal Exchange rose 3.3% to $7 049.25/t, its highest since June 18. Benchmark copper on the Shanghai Futures Exchange climbed by its 5% daily limit to 50 790 yuan ($8 300) per tonne.
Price increases in oil were far more subdued, although Brent and US crude futures managed to hit new multi-month highs, stretching recent gains.
Front-month Brent crude rose 34c to $108.85 a barrel, its highest since April 3. US crude peaked at $107.45, its loftiest since late March 2012.
West Texas Intermediate crude jumped nearly 3% in the previous session, its biggest daily rise since early May, after data showed the biggest two-week drop on record in US crude stockpiles, pointing to strong demand in the top oil consumer.
Brent's premium to US crude narrowed to $1.32 at one stage, the smallest since November 2010.
