Commodities extended rally on weak dollar; G-20, Asia-Pacific data to impact next week

Commodities extended rally in the week to November 5 after a stronger-than-expected U.S. jobs data boosted their investment appeal over the dollar, also resulting in strengthening of commodity currencies such as Australian and Canadian units.

In coming days, currency market reaction to developments at G-20 summit in Korea will likely guide the commodities. Any data showing direction of growth in major powers in the Asia Pacific will also be crucial, analysts say.

Crude

U.S. crude for December delivery touched a 2-year high above $87 a barrel before settling near $86.85 for the week. The commodity was up $5.42 or 6.6 percent in the week.

A release from the Organization of Petroleum Exporting Counties (OPEC) showed its reference crude oil basket price rose to $84.33 a barrel on Thursday, up from $79.42 on Thursday.

Fed, NFP and currencies

The greenback at the same time fell against most of its main counterparts. It was down 3.37 percent against the Australian dollar and weakened 2.08 percent versus the Canadian currency in the week.

Data showed on Friday that U.S. non-farm payrolls for the month of October rose by 151,000, against street expectations of 60,000.

The U.S. dollar was hit by a Fed decision revealed earlier in the week to buy more assets from the market, effectively increasing the currency supply. The Fed move was a boost for recovery hopes, helping share markets rise in many parts of the world.

Gold sets new record, Silver at 30-year high

Gold and silver too rallied on the back of the Fed policy in the week. Gold futures rose as high as $1,398.70 an ounce while silver jumped to a 30-year high of $26.54.

Gold futures for December delivery rose by $14.60, or 1.1 percent, on the Comex in New York, to settle at a record $1,397.70. The yellow metal that is heading for its 10th straight yearly gain has rallied 28 percent so far in 2010 and was up 3 percent in the week. Gold for immediate delivery also rose to a record $1,398.27.

Chilean strike gives extra boost to copper, aluminum near 2-yr high

On the London Metal Exchange (LME), copper for December delivery rose nearly 6 percent in the week to settle near $8,660 a tonne, up $60 from Thursday. It rose to a two-year high of $8,769.50 during the day, at which level it was only $170.5 short of its all time high hit in July 2008.

On the COMEX metals division of the NYMEX (New York Mercantile Exchange), the December copper was up 3.65 cents at $3.9485 per lb.

Copper prices were also supported by a strike in Chile, the biggest producer of the metal, despite mine authority's statement that output was unaffected and could tackle the issue with replacement workers. Union workers began a strike over pay at the world's largest copper mine Collahuasi in Chile on Friday. A study on the recent history, however, shows that strikes at Chile's copper mines mostly ended soon.

Aluminum also rose on the day and at intra-day high of $2,488 a tonne, it was very much close to $2,494, its highest since September 2008.

Key information due next week

Consumer price index, industrial output, trade balance, producer prices, retail sales and urban property prices - all for October- are the key data expected from China next week. India's October industrial production data is also scheduled for next week. Any sign of increased demand for raw materials from Asia-Pacific's major growth engines will further increase the risk appetite and push up commodity prices.

October jobs data of Australia, third quarter producer prices and retails sales figures from New Zealand will also be watched for more cues on demand from the region. Australia had hiked its key rate to 4.75 percent on Tuesday and a stronger-than-expected jobs data had intensified expectations that its neighbor New Zealand will soon follow suit.

The G-20 summit in Korea is expected discuss growing concerns of global trade imbalances, China's policy to keep its currency weak, allegations that the U.S. is allowing the greenback to weaken by supplying more currency by expanding its asset purchase program. Comments by key officials will all likely reflect in the commodity prices through reactions in currency market.

The outcome of the summit can be crucial for investors who are keen to measure the intensity of ongoing tensions with regard to trade and forex and will impact their positioning in the coming days.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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