Bloomberg News

Commodities Advance to One-Month High on Stimulus Speculation

July 03, 2012

Commodities advanced to the highest level in more than a month on expectations that central banks in the U.S., Europe and China will ease monetary policy to spur growth, boosting demand for raw materials.

The Standard & Poor’s GSCI Spot Index gained as much as 2.2 percent to 610.58, the highest intraday level since May 30, and was at 610.48 as of 1:50 p.m. in London. Crude oil gained as much as 2.8 percent, copper rallied to the most since May 22 and gold traded at the highest in almost two weeks.

The European Central Bank is forecast by economists to cut interest rates this week to help curb the debt crisis while a state-owned newspaper in China said the time is ripe for a reduction in the reserve requirement ratio for major banks. Declining employment figures this week may prompt the Federal Reserve to initiate fresh stimulus, BNP Paribas SA said.

“The mood on the financial markets has generally been bright since the end of last week,” Andrey Kryuchenkov, an analyst at VTB Group in London, said today in an e-mailed note. “Gold is reaping the benefit of market expectations for further monetary easing around the globe to stimulate economic growth.”

Today’s commodity rally exceeded the 0.3 percent gain in the MSCI All-Country World Index of equities, and trimmed this year’s loss to 5.5 percent. Prices of raw materials from oil to copper soared 92 percent during the time when the Fed bought $2.3 trillion of debt in two rounds of economic stimulus from December 2008 to June 2011.

Oil for August delivery rose 2.7 percent to $85.97 a barrel on the New York Mercantile Exchange. Three-month copper climbed as much as 2.5 percent to $7,815 a metric ton on the London Metal Exchange.

Bullion for immediate delivery rose as much as 1.2 percent to $1,616.75 an ounce, the most since June 20, and last traded at $1,614.57 an ounce.

To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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