Speculators raised bullish bets on commodities to a 12-week high on signs that global growth will boost demand at a time when shortages are forecast for everything from copper to palladium to cocoa.
Money managers expanded their combined net-long position across 18 U.S. futures and options by 11 percent to 823,917 contracts in the week ended Jan. 31, Commodity Futures Trading Commission data show. That’s the highest since Nov. 8. Gold wagers surged the most since September 2009, silver holdings rose for a fifth week and cattle bets climbed to a 10-week high.
The U.S. jobless rate fell to the lowest in three years in January as payrolls rose more than forecast, the government said Feb. 3. Reports last week showed that manufacturing is expanding in India, the U.S. and China, the world’s biggest energy and metals consumer. Investments in commodities are expanding at the quickest pace in six years after prices rebounded 16 percent from a 10-month low in October.
“Growth is back in vogue,” said John Stephenson, who helps manage $2.7 billion of assets at First Asset Investment Management Inc. in Toronto. “It definitely helps commodities that we’re seeing strong economic numbers, especially the payrolls in the U.S. That’s a very welcome sign.”
The Standard & Poor’s GSCI Spot Index of 24 commodities was little changed last week, losing less than 0.1 percent. The gauge jumped 1.3 percent on Feb. 3, the most in a month, after the U.S. jobs data topped economist estimates. The MSCI All-Country World Index of equities climbed 2.3 percent last week, and the U.S. Dollar Index, a measure against six trading partners, was little changed. Treasuries fell 0.3 percent, a Bank of America Corp. index shows.
Twelve of the 24 raw materials tracked by S&P climbed last week, led by Brent crude, which gained 2.8 percent. Hogs rallied 1.8 percent, and wheat rose 2.1 percent. Declines were led by natural gas and cocoa. The S&P gauge rose 0.3 percent to close at 668.53 today.
U.S. payrolls climbed by 243,000 in January, the most since April, Labor Department figures showed Feb. 3. The unemployment rate dropped to 8.3 percent, the lowest since February 2009. Purchasing managers’ indexes for China and India gained in January, while a report from the Institute for Supply Management’s gauge of U.S. manufacturing expanded at the fastest pace in seven months.
Funds put $1.84 billion into commodities in the week ended Feb. 1, the most since November, according to Cambridge, Massachusetts-based EPFR Global, which tracks investment flows. Gold and precious metals made up most of last week’s increases, according to Brad Durham, a managing director at EPFR. Inflows last month totaled $1.09 billion, the best January performance since 2008, he said.
“The resilience of the economic data has underpinned the rebound in risk sentiment,” Ric Deverell, the head of global commodities research at Credit Suisse Group AG in London, said in a report Feb. 2. “We think that many prices will continue to increase over the remainder of 2012.”
JPMorgan Chase & Co. and Goldman Sachs Group Inc. have warned that prices for some commodities rallied too fast after a London gauge of six industrial metals had its best January since 2006. The International Monetary Fund and World Bank cut their global-growth forecasts last month, citing the risks of a slowdown in Europe.
This year’s surge in metals prices isn’t sustainable because the economy lacks the demand “spark,” Michael J. Jansen, an analyst at JPMorgan in London, said in a report Jan. 30. Goldman’s commodity research team, led by London-based Jeffrey Currie, withdrew a recommendation to buy copper on Jan. 31 after a 16 percent gain in about six weeks led the bank to say the rally was “too much, too soon.”
The number of contracts outstanding across the 24 commodities tracked by the S&P GSCI climbed 9.3 percent last month, the most since January 2006, data compiled by Bloomberg show. Funds lifted bullish gold holdings by 26 percent last week to 159,509 contracts. Silver bets jumped 17 percent to 18,702 contracts, and copper wagers climbed for a third straight week to 7,695 contracts, the highest since August.
Consumption will outpace supplies for copper, palladium and iron ore, Morgan Stanley analysts Peter Richardson and Joel Crane said in a report Jan. 17. Rabobank International is forecasting shortfalls for soybeans, coffee and cocoa, according to its January monthly outlook report.
A measure of 11 U.S. farm goods showed speculators increased wagers on higher agricultural prices by 9.7 percent to 393,567 contracts, the highest in three weeks. Corn bets jumped 17 percent, the most in a month. Investors trimmed their bearish holdings in cocoa and wheat.
Hot, dry conditions may cut corn and soybean output in Argentina and Brazil, the world’s top producers after the U.S., prompting Goldman to raise its price forecast for both crops last week. Plunging temperatures in eastern Europe threaten wheat, while adverse weather in West Africa may limit cocoa supplies. Accelerating global growth signals improving demand after food costs tracked by the United Nations fell 5.5 percent last year, the first retreat since 2008.
“Agricultural prices have really benefited from the cold weather in Europe and the relatively poor weather in South America,” said Nic Johnson, who helps manage $30 billion in commodity assets at Pacific Investment Management Co. in Newport Beach, California. “The latest expectations for supplies have come down.”