Commodities Prices Jump, And Upward Trend

Tag : metal gold

Other commodities shared the love. Corn surged about 28% and forthe first time passed the $8-a-bushel mark; soybeans rose 34% insync. And gold, enjoying its biggest one-day dollar move in 23years last week, ended the quarter up 1.1%.
The inability to tame the beasts wasn't for lack of trying. Duringthe past several months, lawmakers, economists and business peopletried to do their part to balance supply and demand. At the sametime, they debated the role of financial players such as pensionplans and hedge funds in commodities' rise, questioning whether theinflux of cash in relatively new commodities investments should becurtailed or whether a broadened spectrum of participantsultimately helps a market.
World-wide, countries made efforts to reduce consumption. Higherprices led some Asian nations to relax energy subsidies. Record oilprices prompted Americans to buy smaller and more fuel-efficientcars, according to auto makers' sales results. Consumers droveless, as gasoline in the U.S. surpassed $4 a gallon. Total U.S.vehicle miles traveled posted a 4.3% decline in March from a yearago, the biggest year-on-year drop since the data were firstreported, in 1942. It dropped again in April, by 1.8%.
But prices marched on. And few are betting that their course willchange. S&P GSCI, a broad-based commodities benchmark, added29% in the second quarter.
Emerging-market demand has shown no willingness to let up. In June,when China announced a large increase in gasoline and dieselprices, crude oil initially tumbled on the news. But China'srefineries are willing to pay more for crude oil if the gasolinethey refine can be sold at prices closer to market value ratherthan the lower subsidized price. And refiners there are strugglingto supply ever-more gasoline to China's burgeoning population ofdrivers. China's latest trade data show that in May it became a netimporter of gasoline for the first time.
Global oil consumption in the first quarter rose at a slower pacethan expected, according to the Energy Information Administration.However, the agency still projects growth of 960,000 barrels a daythis year, thanks to continued economic growth in developingcountries.
Global demand increases for corn are expected to mute any domesticdeclines in the U.S. The number of cattle being fed in June dropped4% from a year ago, according to the U.S. Department ofAgriculture. "That's a significant loss of demand," as half of U.S.corn is used as cattle feed, says Darrel Good, an agriculturaleconomics professor at the University of Illinois atUrbana-Champaign.
But China turned into a net corn importer in May after its importsrose more than 20 times from a year ago, and imports of soybeansand cotton were up 17% and 19%, respectively, according to BarclaysCapital. Grappling with skyrocketing food prices and protestsagainst rising costs of living, some food producers introducedexport restrictions to avert domestic shortages, which furthertightened global supplies.
Commodity bulls see higher prices as the key to solving thesupply-and-demand imbalance. When prices go high enough,consumption will fall and production will increase, says JimRogers, a veteran commodities investor.
Even gold bugs, who spent much of the quarter on hiatus, came outin force as the quarter waned. After tumbling to $850.90 during thequarter, gold futures shot up to $926.20 a troy ounce at the end.Its short-term future may depend on which force prevails --inflation fears or physical demand for the precious metal. Golddemand fell 16% to five-year lows in the first quarter, accordingto the World Gold Council, as the sharp rise in prices causedconsumers to spend less on electronics and jewelry.
Silver wobbled throughout the quarter, ending with a 0.8% gain.
Recessionary worries hit many industrial metals as supply outpaceddemand. Among the decliners, zinc plunged more than 30% from itsmid-March peak, down 16% for the second quarter. The metal, whichis mainly used for galvanizing steel for automobile andconstruction industries, suffered from "a sharp reduction" inEuropean demand, said the International Lead and Zinc Study Group.Global demand inched up 0.6% for the first four months, slower thanlast year's demand growth of 6.6%, the group said. Demand laggedbehind the supply growth of 1.5% and led to a glut of zinc.Similarly, nickel and lead fell 26.5% and 36%, respectively, in thequarter.
Write to Carolyn Cui at carolyn.cui@wsj.com