Fri Jul 27, 2012 5:21pm EDT
* Grains lead gains after rains trigger weekly decline
* Oil, gold, copper all ride risk rally to higher ground
* After middling GDP, focus shifts to Fed meet next week
By Jonathan Leff
NEW YORK, July 27 (Reuters) – Commodities rose the most in over a week on Friday, but a renewed rally in drought-stricken grain markets and growing hopes for further global stimulus came too late to prevent the sector’s first weekly decline in over a month.
Mounting speculation of further Federal Reserve action and new measures to restore order in the Euro zone boosted commodities amid a broad rally in riskier assets. Oil rose for a fourth day, gold neared its highest since early May and copper rose more than 1 percent. U.S. stocks climbed 2 percent.
Chicago grain markets also resumed their more than month-long rally, with corn and soybeans climbing 2 percent as new forecasts showed the worst U.S. drought in more than half a century could deepen next week. But grains still ended the week lower for the first time since mid-June after earlier rains fueled profit-taking from record highs.
After a lackluster start, commodities climbed at midmorning as traders bet that downbeat U.S. data showing gross domestic product expanded at a 1.5 percent annual rate between April and June — the weakest pace of growth since the third quarter of 2011 — could add pressure for Federal Reserve relief.
Euro zone developments also buoyed the mood. French leader Francois Hollande and his German counterpart, Angela Merkel, said after a phone call they are determined to do all they can to safeguard the single currency. And Bloomberg News reported that ECB President Mario Draghi will meet with Bundesbank President Jens Weidmann to discuss several measures, including bond purchases, to help the euro zone.
“Financial markets see a benign mix of gently rising risk appetite as worries over an imminent euro zone disaster ease and prospects for another U.S. stimulus increase,” said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.
The Thomson Reuters-Jefferies CRB index, the commodity market bellwether, ended the week down 1.6 percent, breaking a four-week streak of gains that had boosted the index by more than 13 percent to its highest in over two months. The CRB rose 0.7 percent on Friday, its biggest gain in six days.
By day’s end traders had shifted their focus to the next Federal Reserve policy meeting Tuesday and Wednesday, with growing talk that Ben Bernanke may push ahead with a third round of bond buying in order to aid the sputtering economy.
The French and German comments followed Thursday’s move higher after European Central Bank President Mario Draghi said the ECB was ready to do whatever it takes within its mandate to preserve the euro.
Gold climbed 0.5 percent to $1,622.96 on Friday and logged its biggest weekly gain in eight weeks, although it ended off the day’s highs after the euro recovered from an earlier drop and as some traders questioned the outlook.
“The U.S. economy is growing, but today’s number was right on the fence between stronger growth and no Fed action, and weaker growth with Fed action,” said Adam Sarhan, chief executive of Sarhan Capital.
Uncertainty over the course of Fed policy has kept bullion range-bound for months, but a break-out may be near. New York futures trading volume was double the 30-day average, data showed. And a break above key resistance at around $1,640 an ounce could send gold back to $1,800 an ounce, said Mark Arbeter, chief technical strategist of S&P Capital IQ.
London Metal Exchange (LME) three-month copper firmed $98 to close at $7,568 a tonne, off an intra-day peak of $7,584, climbing further away from Wednesday’s one-month low of $7,344.25.
Brent September crude rose $1.21 to settle at $106.47 a barrel, posting a 36-cent loss for the week after four straight weekly gains. Trading activity was about a third below its recent norm, however.
GRAIN GAINS WITHOUT RAINS
Agricultural markets remained in thrall to the drought that has decimated the U.S. corn crop and now threatens to deny soybeans the moisture they need to set pods in the coming weeks. The latest forecast scaled back expectations for rain during the next five days, particularly in Illinois, the second-biggest soybean state, according to Commodity Weather Group.
“We are back on dry, hot weather for the United States and disappointing rains for the corn and bean belt,” said Mike Zuzolo, president of Global Commodity Analytics & Consulting in Lafayette, Indiana.
CBOT new-crop November soybeans rose 34-1/4 cents, or more than 2 percent, to $16.01-3/4 a bushel, pushing back toward Monday’s record of nearly $17. The November contract had surged more than a third since the end of May.
The December corn contract rose 17 cents, or 2.2 percent, to $7.93-1/4 a bushel, a shade short of its record over $8, but was still down 0.2 percent from a week ago. (editing by Jim Marshall)