http://www.bloomberg.com/apps/news?pid=20601087&sid=aJhZSAGRnfjk&refer=home
Commodities Rally, Heading for Biggest Weekly Jump Since 1975
By Millie Munshi
Aug. 21 (Bloomberg) -- Commodities headed for their biggest weekly gain in 33
years as oil rose for a third day and a weakening dollar revived demand for raw
materials as alternative assets.
The Reuters/Jefferies CRB Index of 19 commodities soared 3.7 percent to 405.92
in New York. A settlement tomorrow at that level would mark a 6.2 percent gain
for the week, the most since July 1975. The dollar dropped the most against the
euro since June today and oil jumped more than $5 a barrel.
The rebound in the CRB and a resumption of the dollar's decline may stall a
rout in commodities that has sent the index down 14 percent from a record on
July 3. Raw materials priced mostly in dollars often move in the opposite
direction of the U.S. currency.
``The bounce in the dollar had caused people to sell commodities aggressively,
and a lot of that selling became overdone,'' said Chip Hanlon, who helps manage
$1.5 billion at Delta Global Advisors in Huntington Beach, California. ``This
move may tell us that those downtrends are over. Commodities could continue to
rally from here.''
Every commodity on the CRB except hog futures moved higher today. Nickel jumped
8 percent, cocoa rose 6.8 percent and silver rallied 5.2 percent. Oil and gold
had their biggest one- day advances since June. Platinum jumped 6.6 percent,
the most since September 2001.
Chinese Demand
Commodities also gained today on speculation demand will increase from China as
the country resumes work at factories and infrastructure projects that were
shut or slowed during the Olympics, which end Aug. 24.
``China's demand is very important to the commodity markets,'' Hanlon said.
``Now that they're ready to start bringing back factories that had been idled,
I wouldn't be surprised to see demand start to pick up again there. Their
long-term outlook for growth and development hasn't changed.''
The CRB has more than doubled since 2001 as demand surged in China, the world's
fastest-growing major economy. Mining and oil companies, farmers and other
commodity producers have struggled to keep up with rising consumption as harsh
weather and labor unrest disrupted supplies.
``Until either a lot of supply comes on stream or the economy collapses, the
bull market will continue,'' said investor Jim Rogers, who in April 2006
correctly predicted oil would reach $100 a barrel and gold $1,100 an ounce.
Top Gainers
Today's gains in the CRB were led by nickel futures that rose to their highest
price since July 11.
Cocoa rose the most since November 2004 in New York. The International Cocoa
Organization said a global deficit will be twice as large as previously
expected, with output trailing demand by 88,000 metric tons in the year through
September, up from an earlier forecast of 41,000 tons.
``That news, along with dollar weakness, powered strong early-morning gains,''
Dan Vaught, an analyst for Wachovia Securities LLC in St. Louis, said today in
a report.
The UBS-Bloomberg Constant Maturity Commodity Index rose 4 percent to 1,509.546
at 4:45 p.m. A settlement at that price tomorrow would mark a 6.9 percent gain
this week, the most since the data starts in 1997.
To contact the reporter on this story: Millie Munshi in New York at [EMAIL
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