Commodities bounce back on weaker dollar

chart_ws_commodity_metals_gold.top.pngClick the chart for more commodities data. By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- The high-flying commodities markets hit a patch of rough air this week, but analysts expect strong demand from developing countries will continue to support prices into next year.

Investors have been plowing money into gold, oil and other commodities since September on speculation that the Federal Reserve would pump more money into the economy. The Fed officially announced its $600 billion bond-buying program earlier this month.

But the months-long rally came into question earlier this week amid renewed concerns that Ireland's long-term debt problems could undermine the fragile European economy. Those fears eased Thursday after officials in Dublin signaled that the country is willing to accept aid from the European Union and International Monetary Fund.

Commodities were also pressured this week by signs that China will act to cool its red-hot economy, raising concerns about demand from one of the world's biggest consumers of raw materials. Oil prices plunged 2% on Tuesday after Chinese Premier Wen Jiabao said that the government is preparing steps to tame inflation.

James Cordier, president of brokerage firm Optionsellers.com, said short-term market drivers such as Fed policy and sovereign debt worries are "just noise," adding that an improved economic outlook is the main reason to be bullish on commodities.

"The global economy is doing extremely well right now," said Cordier. "In China, India and parts of Brazil, there are hundreds of millions of people who are looking forward to driving and consuming. That's going to continue to put upward pressure on commodity prices."

Prices for industrial metals were higher on Thursday, with copper gaining nearly 3%. Among agricultural commodities, corn and soy beans gained 3%, while wheat prices rose 2%.

Cotton prices, which have benefited from weather-related supply disruptions, rose about 3%. Cocoa and sugar also rose, while coffee prices declined.

After falling sharply Wednesday, oil prices rallied 1.7% to close Thursday at $81.85 a barrel. Gold prices also moved higher, rising $16.10 to end at $1,353 an ounce, as the U.S. dollar weakened against the euro and other more risky currencies.

The weak dollar tends to support prices for commodities that are priced in the U.S. currency. Many analysts expect the dollar to remain soft into next year as the Fed pumps money into the economy.

But Cordier said demand from developing nations will continue to boost commodity prices even if the dollar turns around. He said a strong dollar would also reflect improved economic conditions in the United States, which could signal stronger domestic demand.

"Even if the dollar is on firmer footing, I don't think that spells the end of a bull market in commodities," he said. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.84%3.80%
15 yr fixed2.95%2.90%
5/1 ARM3.23%3.05%
30 yr refi3.84%3.81%
15 yr refi3.01%2.96%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,672.60 -141.38 -0.79%
Nasdaq 4,757.88 7.48 0.16%
S&P 500 2,051.82 -11.33 -0.55%
Treasuries 1.82 -0.08 -4.17%
Data as of 12:08am ET
Company Price Change % Change
Bank of America Corp... 15.73 -0.36 -2.24%
General Electric Co 24.48 0.20 0.82%
Apple Inc 112.98 0.58 0.52%
Avon Products Inc 7.98 -0.68 -7.85%
Intel Corp 36.44 -0.46 -1.26%
Data as of Jan 23

Sections

Let's be blunt: The central banks have done all they can, and now it's 'sink or swim' time for the global economy. More

The National Hockey League is partnering with GoPro to get hockey fans closer to the action than ever before. More

Hershey has forced an importer to stop selling proper British chocolates in the United States, angering fans of Cadbury and Toffee Crisps. More

Tax season is prime time for cons. Tax scammers are sending out so-called "phishing emails" that appear to be from the IRS and claim that the recipient either owes money or is due a refund. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2015 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2015. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2015 and/or its affiliates.