Just looking at the way commodities went late last week, you’d be excused for thinking that the world was in the midst of an economic boom.
Oil hit a 32-month high, gold hit a record high, silver rose sharply, cotton also hit a high and copper had a solid day on Friday.
Other commodities, such as wheat and corn also rose, even weak copper did well.
Overall, commodities rose for a seventh day to a new two-year high for most indices, led by cotton and silver, on optimism about economic recovery and a weaker dollar.
Gold and tin also climbed to records.
The Standard & Poor’s GSCI Spot Index of 24 raw-materials futures reached 757.22 points, the highest level since August 2008.
It was up 1.6% for a weekly gain of more than 3.5%.
The Reuters/Jefferies CRB index rose 8% in the first quarter and is up 2.6% so far in April, and hit its highest level since September 2008.
In short a boom. But far from it. Europe and the US are still recovering fitfully, Japan has been knocked sideways, China continues to tighten, southern Europe is a basket case and the UK economy is looking at a bout of stagflation.
If you had to pick two factors driving commodity prides higher it’s the cheap money on offer from central banks (and forget the 0.25% rise in European rates last Thursday and the rise in Chinese rates earlier in the week).
It’s the zero cost money flooding out of the Fed that is powering the biggest carry trade of all, borrowing at next to no cost and then investing it in gold, copper, silver, tin, cotton, oil, shares of all kinds, anything offering a positive turn (Australia with our 4.75% official rates).
And that easy money in turn is devaluing the greenback and that remains the biggest single influence on currencies and commodity prices, more than outweighing fears about ECB and Chinese rate rises, Portugal’s begging bowl, the US budget impasse, Middle Eastern fighting and tensions and rising oil prices.
The US Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.6% on Friday to the lowest level since December 2009.
The yen fell (to the relief of Japanese exporters). The euro hit a new six month high, the Australian dollar a new all time high (see markets story) and other currencies were firmer against the US currency.
The euro rose to a 15-month peak versus the dollar on Friday, for a gain of around 1.7% for the week.
In London May Brent crude surged $US3.98 to settle at $US126.65 a barrel, the highest level since August 2008.
Traders blamed the war in Libya, unrest elsewhere in the Arab world, and postponed elections in Nigeria drove bullish sentiment on oil, but they were subsidiary reasons, the continuing weakness in the greenback set markets alight once again.
In New York, May WTI rose $US2.49 to a 30-month high of $US112.79.
Silver for immediate delivery touched $US0.30 an ounce, and cotton reached $US2.124 a pound.
Comex June gold futures jumped $US14.80, or 1%, at $US1,474.10 an ounce on Friday, a closing record high.
Gold traded as high as $US1,476.20 an ounce, an intraday record high.
It was the fifth high in a row last week.
The metal rose 3.2% on the week, its highest five-day gain since early December and its third weekly gain in a row.
But silver was the star as investors sought it out for the greater leverage from the cheaper price (despite the metal being in plentiful supply).
Comex May silver rose $US1.06, or 2.7%, to $US40.61 an ounce, the highest price since early 1980 and a daily rise.
Spot silver set an intraday record of $50.35 in January 1980.
For investors priced out of gold, silver has been the big attractor.
The metal jumped 7.6% this week, more than double gold’s gain.
Silver is up 31% so far this year, gold just 3.7%.
In other commodities, three month tin on the London Metal Exchange was up 1.4% at the day’s high of $US33,000 a tonne.
LME three month lead climbed as high as $US2,870 a tonne and aluminium touched $US2,714 a tonne.
May cotton futures in New York were up 1.6% at $US2.1145 a pound.
In Chicago, May soybeans futures rose 2.2% to $US13.8025 a bushel.
May-delivery corn rose 1.1% to $US7.67 a bushel, which left it up 4.3% for the week.
July wheat futures in Chicago jumped 2.8% on Friday to $US8.3225 a bushel, a rise of 4.6% last week.
Comex May copper added 9c to $US4.50 an ounce on Friday.
That was copper’s highest close since February 15.
