Why commodities are rallying

oilClick chart for more commodity prices. By Hibah Yousuf, staff reporter


NEW YORK (CNNMoney) -- Commodities appear to be back in rally mode. But appearances can be deceiving.

"Investors are grappling with counterbalancing forces and a lot of unknowns, so it's a difficult environment," said Andrew Lebow, senior vice president at MF Global.

Earlier this week, traders dumped commodities amid fears that the disaster in Japan could trigger a global economic slowdown. But the slump was brief.

Oil prices, which had recently been comfortably below $100 a barrel, surged more than 3% Thursday to over $101 a barrel.

And there could be more wild swings to come as investors face a wall of worry.

Political tensions in the Middle East and North Africa, which initially pushed crude prices above $100 a barrel last month, are still hanging in the balance. Investors are also uncertain about supply and demand fundamentals stemming from Japan's disaster.

"We still don't know what the ultimate outcome of all of Japan's problems, but the market seems to be relieved, at least for now," Lebow said.

As crude oil staged a comeback, so did natural gas prices, which rallied over 5% to $4.15 per thousand cubic feet, as investors anticipated that Japan will look to liquefied natural gas to fill its energy gap as it sorts out its nuclear power problems.

Interestingly, gold prices have been relatively lackluster. Investors typically flock toward gold during times of fear and uncertainty, but earlier this week, gold prices tumbled more than 2%. Gold has gotten caught up in the recent run on commodities but prices are still down more than 1% for the week.

"Investors were overly concerned about the events in Japan and had been liquidating pretty much any position they had and moving into cash," said Rohit Savant, senior commodities ananlyst at CPM Group.

Still, Savant said the bullish sentiment toward gold is still intact, and investors are slowing getting back into the precious metal. Gold prices rose $8.10, or 0.6%, Thursday to $1,404.20 an ounce.

Other metals were getting a bigger bounce. Copper prices rallied more than 3%, while platinum rose 0.3% and palladium climbed 1.4%. Much of that is due to the anticipated rebuilding in Japan.

"As Japan moves forward and begins the reconstruction process, demand for industrial metals will increase," said Jeffery Nichols, managing director at American Precious Metals Advisors.  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 fixed4.24%4.20%
15 yr fixed3.30%3.18%
5/1 ARM3.42%3.36%
30 yr refi4.22%4.16%
15 yr refi3.29%3.17%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,131.97 100.83 0.59%
Nasdaq 4,552.76 33.86 0.75%
S&P 500 1,998.98 14.85 0.75%
Treasuries 2.59 -0.00 -0.08%
Data as of 5:27pm ET
Company Price Change % Change
Apple Inc 100.86 -0.77 -0.76%
Bank of America Corp... 16.71 -0.03 -0.18%
Yahoo! Inc 42.71 0.16 0.38%
Alcoa Inc 16.16 -0.23 -1.40%
Facebook Inc 76.08 1.50 2.01%
Data as of 4:02pm ET

Sections

Anheuser-Busch, one of the NFL's biggest sponsors, says it is disappointed with how the league has handled recent controversies. More

Scotland's independence vote is too close to call but those who want to keep Britain united won this year's campaign funding race by some distance. More

The FBI's new facial recognition system lets local police easily identify you. It will one day spot you from your iris, voice and the way you walk. More

Y Combinator president Sam Altman is teaching a startup class at Stanford with Silicon Valley heavy hitters as guest lecturers. Bonus: All the videos will be available for free online. More

What do all 401K millionaires have in common? Christine Romans explains what it takes to be a member of the club. 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.