Commodities rise on hopes of European recovery

New Delhi: Global commodity prices moved up on Tuesday on cautious optimism that Europe would take further concrete action to fix its crippled debt market, and droughts in key farm producers such as the US and India. However, persistent concerns about the the appetite of biggest consumer China pose risk to copper and iron ore.

Brent crude oil for September delivery gained 80 cents on Tuesday to $110.35 a barrel intraday, exceeding the $110-a-barrel mark for the first time since mid-May, on renewed hopes the ECB, as announced last week, may start purchases of government bonds again to cut Spanish and Italian borrowing costs, although details of such operations are yet to emerge. Supply concerns coming from maintenance work at the North Sea, and tensions in West Asia aided the rally in oil prices. US crude, too, firmed by 24 cents to $92.44 a barrel.

The commodity market is awaiting a series of data on China to be released later this week. Gold, too, rallied in the spot market tracking the recovery in the euro versus the dollar. The precious metal often shares an inverse relation with the greenback. Spot gold gained 0.1% at $1,612.80 an ounce intraday, although US August futures shed 70 cents an ounce at $1,615.50. Subdued demand in key consumer India due to high prices and a sharp depreciation of the rupee would add pressure on gold’s rally in the coming days, said analysts. Silver gained 0.3% at $27.94 an ounce intraday.

Copper hit a one-week high intraday on hopes of strong European action may boost consumption of the raw material, but slack demand in China kept a lid on prices. Three-month copper on the London Metal Exchange gained 0.8% to $7,552 per tonne intraday. Copper prices have so far shed more than 13% from the year’s high hit in February. Reflecting still sluggish demand, Chinese copper premia for physical metal have come down to $65 a tonne from a high of $85 in early July, Citi said in a report.

However, spot prices of iron ore have lost 13% in the last one month to hit a two-and-a-half year low of $115.20 per tonne last week on a slide in Chinese steel demand. Benchmark iron ore with 62% iron content lost 10 cents to $116.60 per tonne on Monday, according to Steel Index. Crude steel output in China rose just 1.8% from a year earlier, compared with a 10% rise in the same period in 2011 from the level in the previous year.

Farm commodities gained on Tuesday. Midwest had eased harvest fears. After losing around 3% last week, soyabean for November delivery on the Chicago Board Of Trade gained 0.9% to $15.98-3/4 a bushel intraday as fears re-emerged about the conditions of the crops affected. December corn rose 0.5% to $8.08-3/4 a bushel, while spot wheat gained 0.4% to $8.96-3/4 a bushel.

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