Just as our market had a big day Friday, rising conclusively over the 6000 point mark and finishing there, oil, copper and gold all hit 2007 highs on Friday night, our time, prompting suggestions of a gathering re-run of last year’s commodities boom.
The strong trading in commodities will help sentiment here today, especially among the big resource companies.
The strong price moves re-ignited fears about another break out in inflation just as the sluggish US economy was being unsettled by a depending crisis in the subprime mortgage sector.
The sharp rise in metal and oil prices will offset any fears about the Dow’s weak finish on Friday.
Oil prices moved back over $US61 a barrel on Friday and have now regained all of the losses from the start of 2007.
In another buoyant week for commodities, the second in succession, lead and nickel both reached record levels on the LME, while US corn prices hit another 10-year high (but retreated) as grain prices firmed on fears of dry weather in the US grain regions.
Cash copper topped $US6,300 a tonne and finished at $6,294 on the LME, up almost three per cent alone on Friday and the highest close since the first week of last month.
It hit $2.85 a pound on Friday on Comex in New York, up 7c on the day.
Traders said a driver was the continued encouragement of speculative activity implicit in the Bank of Japan’s indication that interest rates would remain steady for some time after increasing the key official interest rate to 0.5 per cent.
Traders said that indication meant the hedge funds and other speculators will still be able to borrow Japanese yen and invest in physical assets such as commodities, (known as a carry trade) and still make money.
Oil climbed above $61 to a seven-week high because of the re-emergence of supply problems in the US refining industry which has seen a number of facilities shut down by mechanical problems; and by the Iran nuclear issue flaring again as a concern.
As well, petrol stocks are turned down sharply in the US just as US refineries start closing for scheduled maintenance after the winter season. Traders said there could be a tightening of US petrol supplies in the next couple of months, meaning higher oil prices.
The April contract for the West Texas Intermediate grade of light crude hit a 2007 high on Friday of $US61.80 a barrel before easing to $US61.50, a rise of 4 per cent over the week.
Copper prices have almost mirrored the oil price this year, falling heavily in early January to a seven-month low of $5,200 and then rising through this month.
Three-month copper rose almost $US200 to $US6,325 a tonne Friday. Copper has risen 16 per cent from a 10-month low of $5,260 touched at the start of this month, and rose more than 8 per cent last week.
Nickel hit yet another record on Friday when it reached $US40,900 a tonne. Lead also finished the week at a record $US1,935 a tonne, a gain of more than 7 per cent over the week.
Gold and silver climbed to nine-month highs and the latest surge in oil dragged both precious metals higher as a hedge against inflation.
Traders said there was rising demand for the metal (in bars and coins) and in the increasingly popular Gold ETFs (exchange-traded funds).
Gold for April delivery climbed $US3.70 to $US 686.70 an ounce on Comex in New York Mercantile Exchange, after hitting $US691.90, the highest since last May.
Gold was up 2.1 per cent this week, the seventh weekly gain and the longest rally since May (when the futures price hit that 26 year high of $US732 an ounce).
Silver for March delivery surged 34.5 cents to $US14.595 an ounce, the highest since May when prices hit a 23 year high of $US15.20.
According to information on the World Gold Council website, investment demand in exchange-traded funds is 19.1 million ounces of gold, up from 18.14 million ounces at the end of last year.
ETF demand is driving much of the investment activity in the metal.