Oct. 30 (Bloomberg) -- Gold, crude oil and corn extended the biggest surge in commodity prices in five decades on speculation interest rate cuts in the U.S. and China may revive demand for raw materials consumption.

Commodities were buoyed by a drop in the U.S. dollar and a rebound in equities after borrowing costs were reduced to alleviate a credit freeze and spur growth.

``The market seems to like the cuts as we're seeing broad gains across the commodities asset class,'' Darren Heathcote, head of trading at Investec Bank Ltd., said by phone from Sydney. ``At the moment it looks like investors are a bit happier but we're on shaky ground and it won't take much to cause an earthquake.''

The Reuters/Jefferies CRB Index of 19 raw materials jumped 5.9 percent yesterday, the most since at least 1956, when the data begin. The index is still down 24 percent this year. China, the world's largest industrial-metals user, trimmed interest rates for a third time in two months, and the Federal Reserve slashed bank borrowing costs in the U.S., the biggest oil user, to 1 percent.

``Commodities are pricing in a recovery in demand that will be sooner than people had earlier expected,'' said Eugen Weinberg, a commodities analyst at Commerzbank AG in Frankfurt.

The ICE futures exchange's U.S. Dollar Index, which tracks the greenback against six trading partners, fell for a second day, after the rate cut and ahead of a report that may show the world's biggest economy contracted the most since 2001. The index dropped the most in 10 years yesterday.

Rate Cuts

The Federal Reserve has cut its benchmark bank-lending rate from 5.25 percent in the past 13 months and set up six programs to channel more than $1 trillion into the financial system.

A gauge of energy producers in the MSCI World Index and a measure of mining and chemical companies rose for a third day today.

Gold advanced as the dollar fell below $1.30 per euro for the first time this week. Bullion for immediate delivery has gained 5.2 percent in the past three days.

``A significantly weaker dollar is certainly adding to gold's gains today,'' Investec's Heathcote said.

Crude oil for December climbed 3.2 percent to $69.69 a barrel on the New York Mercantile Exchange at 11:01 a.m. in Singapore, extending yesterday's 7.6 percent rise. Crude has fallen 53 percent from its record $147.27 on July 11.

The Organization of Petroleum Exporting Countries will ``probably'' cut its output quotas a second time to limit swelling inventories, Venezuelan Oil Minister Rafael Ramirez said in a state-television interview. The group lowered output targets by 1.5 million barrels a day after an Oct. 24 meeting.

`Feel-Good Factor'

``It's all moving on the back of the equity feel-good factor,'' said Robert Laughlin, a senior broker with MF Global Ltd. in London. ``The fundamentals of the oil market have gone for the moment.''

The MSCI Asia Pacific Index of equities gained 4.5 percent today, still down 47 percent this year.

On the London Metal Exchange, industrial metals declined after copper jumped the most in at least 22 years and zinc rose the most in at least 19 years yesterday.

``The outlook for metals demand has been weak for some time,'' said Wang Fei, an analyst at Maike Dickson Investment Management Co., from Shanghai. ``It's not going to change overnight because central banks lowered interest rates.''

A ``supercycle'' for the commodity has ended, and the market will remain depressed until the international financial situation improves, Chile's state-owned Codelco, the world's largest copper producer, said Oct. 23.

Corn futures for December delivery added as much as 2.4 percent to $4.31 a bushel, while wheat and soybeans extended their biggest gains in at least 20 years.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

Last Updated: October 29, 2008 23:21 EDT