Commodities Set for Longest Run of Weekly Gains Since ’96
By Joe Richter – Feb 1, 2013

Commodities headed for the longest run of weekly gains in 17 years on mounting speculation that the economies in the U.S. and China will rebound, boosting demand for metals, energy and crops.

The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 0.6 percent to 679.72 at 12:41 p.m. New York time. The gauge headed for the eight straight weekly gain, the longest rally since January 1996. Industrial metals and energy led today’s advance.

In January, U.S. hiring increased after accelerating more than estimated at the end 2012, and China’s manufacturing expanded, adding to evidence of economic gains. In 2012, the GSCI extended a rally for the fourth straight year, led by agriculture prices. In the week ended Jan. 22, hedge funds increased bullish commodity bets by the most in six months, the latest government data showed.

“We’re fairly positive on commodities going forward,” Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati who helps oversee $14.7 billion, said in a telephone interview. “Investors are pumping money into the complex once again. Growth expectations for China are starting to ratchet up.”

Eighteen GSCI components rose, and the gauge earlier reached 681.5, the highest since Sept. 17. This week, the index has climbed 2.6 percent, the most since mid-September.

Investors snapped up commodities at the fastest pace in a year. The number of contracts outstanding for the 24 GSCI components jumped 6.2 percent last month, the biggest gain since January 2012.

‘Clearly Positive’

“Improving growth prospects are clearly positive for commodities and will help returns, which should also reinforce flows into the asset class,” Nic Johnson, a money manager who helps oversee about $30 billion in commodities at Pacific Investment Management Co. in Newport Beach,California, said yesterday in an e-mail. He said the rally will continue this year.

Nickel and aluminum prices in London rose today on manufacturing gains in the U.S. and China. Copper traders are the most bullish in 15 months, a Bloomberg survey of traders showed. Gold and silver climbed amid speculation that the Federal Reserve will increase stimulus measure after the jobless rate increased.

“The U.S. will show at least moderate growth going forward this year, and U.S. stimulus should lead to higher commodity prices,” said Daniel Briesemann, a commodity analyst at Commerzbank AG in Frankfurt. “China’s economy is definitely gaining momentum and picking up. It will be the main driver.”

‘Improving Perceptions’

Crude oil gained in New York, heading for the longest stretch of weekly advances in more than eight years, on economic optimism following the U.S. payroll and manufacturing data.

“Prices have primarily moved higher on improving perceptions about the economy,” said Bill O’Grady, the chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “The numbers today show that the economy was a little better than we thought, and that’s mildly supportive for both oil and the products.”

Corn and soybean futures in Chicago gained today on concern that dry weather will reduce output in Argentina. Wheat was little changed, erasing an earlier advance on the persistent drought in the southern U.S. Great Plains. In 2012, the grain climbed 19 percent, the most among GSCI components.

Today, the Dow Jones Industrial Average traded above 14,000 for the first time since 2007 on the jobs data.

To contact the reporter on this story: Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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