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 fixed4.28%4.30%
15 yr fixed3.24%3.18%
5/1 ARM3.41%3.53%
30 yr refi4.19%4.22%
15 yr refi3.18%3.12%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,020.89 -18.60 -0.11%
Nasdaq 4,542.32 10.22 0.23%
S&P 500 1,990.56 -1.81 -0.09%
Treasuries 2.40 -0.01 -0.37%
Data as of 2:17pm ET
Company Price Change % Change
Bank of America Corp... 16.15 -0.01 -0.06%
Apple Inc 101.09 0.51 0.51%
Salesforce.com Inc 60.38 4.67 8.38%
Facebook Inc 74.57 0.00 0.00%
Citigroup Inc 50.89 -0.18 -0.35%
Data as of 2:02pm ET

Sections

The Secret app is supposed to keep you anonymous. But until last week, it was possible to trace posts directly to you. More

Entrepreneurs are cashing in on the legal marijuana now available in the state. More

This month, Delaware became the first state to pass a law giving heirs the right to access the online accounts and assets of someone who has passed away. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.