Key commodities advanced on Monday on renewed optimism that the US may avert a budget crisis and that the Chinese economy will rebound following a smooth leadership transition.
Brent crude, gold and copper rallied by around 1% each in intraday trade, although the demand outlook still looks fragile for key raw materials.
Oil inched up towards $110 a barrel on Monday as investors wager US lawmakers would find a common ground to fix the fiscal cliff ? more than $600 billion in tax hikes and spending cuts? which many believe could drive the world’s biggest economy back into recession. Brent crude also got a leg-up from rising apprehension that the Israeli-Palestinian armed conflict may drag other Arab nations into the scene and potentially threaten supplies from West Asia, which accounts for more than a third of the world’s crude oil.
Brent crude futures gained 92 cents to $109.87 a barrel by 1200 GMT, while U.S. crude oil soared $1.00 to $87.92.
Similarly, gold gained from a weaker dollar after dropping 1% last week, and investors are mostly focussed on how the US tackles the fiscal cliff. The precious metal usually shares an inverse relation with the greenback and has been mostly tracking the movement of the euro. Spot gold jumped 0.59% to $1,723.6 an ounce intraday, and US gold futures advanced 0.5% to $1,723.70.
The dollar index eased from Friday’s two-month high, making commodities priced in the greenback more attractive for buyers using other currencies.
Copper climbed by more than 1% intraday on hopes of a Chinese recovery following seven-straight quarters of an economic slowdown after the smooth change of guard.
China, the world’s top copper consumer, announced last week its economy was likely to meet its growth target for the year, which means the new leadership would continue vigorous focus on growth and demand for raw material may rise.
