Commodity prices off to strong start in 2012

AP News
Posted: Jan 03, 2012 4:15 PM
Commodity prices off to strong start in 2012

It didn't take commodities long to shake the post-holiday doldrums.

Commodity prices jumped across the board Tuesday after positive economic news from the United States, China and other countries helped ease, at least for now, concerns about Europe's financial troubles. Silver ended up 5.9 percent; gold increased 2.2 percent, oil jumped 4.2 percent and corn rose nearly 2 percent.

Investors were encouraged by signs of an improving U.S. economy. The Institute for Supply Management trade group said manufacturing expanded in December at the fastest pace in six months and the government said construction spending rose 1.2 percent in November.

The news came on the heels of reports that manufacturing increased in China, which created hope that it is working to moderate its economic slowdown.

In Germany, the average number of people unemployed last year was the lowest in two decades. Germany had an unemployment rate of 6.6 percent, compared with 8.6 percent in the United States.

The gains came after a difficult December in which many contracts ended lower, including gold, oil and copper.

The positive news, coupled with a lack of negative headlines from Europe, supported the commodities markets, said Dave Meger, vice president of metals trading at Vision Financial Markets. Commodities investors also took their cue from the stock market, which rose sharply.

Commodities also benefited from a weaker dollar. Commodities are priced in dollars, so a weaker dollar makes them more of a bargain for investors who buy them using other currencies.

In metals trading, gold for February delivery rose $33.70 to end at $1,600.50 an ounce and March silver increased $1.657 to finish at $29.572 an ounce. March copper rose 9.25 cents to finish at $3.5285 a pound; April platinum increased $27.60 to $1,432.50 an ounce and March palladium ended up $7.35 at $663.50 an ounce.

In other trading, oil prices skyrocketed on concerns that Iran may try to close the Strait of Hormuz in the Persian Gulf to oil tankers if Western nations impose new sanctions.

Iran has warned the United States to stay out of the strategic waterway, where one-sixth of the world's oil shipments pass every day. On Monday, its navy fired a cruise missile as part of a military exercise. The U.S. and European nations are considering additional economic sanctions against Iran because of its nuclear program.

Benchmark crude rose $4.13 to finish at $102.96 per barrel on the New York Mercantile Exchange. Heating oil rose 12.4 cents, or 4.3 percent, to finish at $3.0382 per gallon; gasoline futures increased 9.12 cents, or 3.4 percent, to $2.7486 per gallon and natural gas rose 0.6 cent to $3.022 per 1,000 cubic feet.

In March agriculture contracts, wheat rose 4.25 cents to finish at $6.57 per bushel, corn increased 12 cents to $6.585 per bushel and soybeans ended up 19.75 cents at $12.275 per bushel.