Commodities Set for Longest Run of Weekly Gains Since ’10

Commodities posted the longest run of weekly gains since 2010 as the Federal Reserve’s third round of monetary measures to boost the U.S. economy spurred speculation that energy and metal demand will increase.

The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 1 percent to settle at 694.21 at 4 p.m. New York time, capping a seven-week rally that is the longest since October 2010. Industrial metals led the gains, and crude oil in New York topped $100 a barrel for the first time since May.

The Fed said yesterday it will expand holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month and keep the benchmark interest rate near zero “at least through mid-2015.” The GSCI index surged 92 percent from the end of 2008 through June 2011 as the Fed bought $2.3 trillion of debt in the first two rounds of quantitative easing and held borrowing costs at a record low.

“The current commodity rally follows assurances by the U.S., EU and China that policies are turning more accommodative,” Sijin Cheng, a commodity analyst at Barclays Plc in Singapore, said in an e-mail. “Market sentiments are quickly shifting to a risk-on mode.”

The GSCI index earlier reached 699.13, the highest since April 3. The gauge is up 7.6 percent this year as the MSCI All-Country World Index of equities climbed 14 percent. Treasuries returned 1.7 percent, a Bank of America Corp. index shows. The dollar dropped 1.7 percent against a basket of major currencies.

Wen’s Pledge

China’s Premier Wen Jiabao said on Sept. 11 that there’s more room for stimulus measures to support economic growth. The country has refrained from easing monetary policy since cutting interest rates in June and July. European Central Bank President Mario Draghi said on Sept. 6 that policy makers agreed to an unlimited debt-purchase program to tame the region’s debt crisis.

A measure of the five industrial metals in the GSCI index jumped 4.4 percent, the most since November 2011. Aluminum, traded on the London Metal Exchange, rose for the 11th straight session, the longest rally in at least 25 years. Nickel jumped 6.1 percent and lead climbed 5 percent, marking the biggest gains in 10 months.

Oil futures for October delivery rose 0.7 percent to settle at $99 on the New York Mercantile Exchange, the highest settlement since May 3. Earlier, the price reached $100.42, the highest since May 4.

Mideast Tensions

Escalating unrest in the Middle East and North Africa, which hold more than half of the world’s oil reserves, fueled concern supplies may be disrupted. Iran is raising tension by expanding its nuclear program, according to Robert Wood, the U.S. envoy to the International Atomic Energy Agency.

“Middle East geopolitical concerns should add a premium of about $5 to $6” to oil, said Jonathan Barratt, the chief executive officer at Barratt’s Bulletin, a commodity newsletter in Sydney.

Raw materials as measured by the S&P GSCI Enhanced Commodity Index Total Return may climb an additional 10 percent, led by oil-supply concerns, Jeffrey Currie, the head of commodity research at Goldman Sachs Group Inc., said on Sept. 6.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE