Oil, metals and grains prices jumped about 3 percent each Wednesday, despite worries about oversupply, after data showing U.S. gross domestic product growth sparked optimism the recession may be winding down.
U.S. GDP expanded 3.5 percent in the third quarter, the first growth in more than a year, data from the Commerce Department showed. That sparked a sell-off in the dollar, which had risen earlier this week on safe-haven buying by investors worried about the economy, and boosted gains in commodities and equities
The Reuters/Jefferies CRB, a widely watched basket of 19 commodity futures, was up more than 2 percent by 15:30 EDT as the rally extended to markets like gold , sugar and cotton.
"The U.S. GDP was better than expected, and that has encouraged some more risk appetite," said Daniel Smith, an analyst for precious metals at London's Standard Chartered ( SCBEF.PK - news - people ). "The general trend is still for further dollar weakness, which will be supportive for the whole commodities complex."
In crude oil, the benchmark U.S. front-month contract rose $3 to touch a session high of $80.46 a barrel before settling at $79.87.
U.S. crude ventured above $80 a barrel earlier this month for the first time in more than a year, forming an important psychological support for the market.
Some analysts think the market is overpriced at such levels, given the multi-year highs in U.S. oil inventories. Much of oil's gains this year were due to the weak dollar and not actual physical demand, they argue.
Total U.S. oil product demand has dropped by about 3 percent from a year earlier, data this week showed. But prices have more than doubled from the recession's lows of around $33 a barrel in January, although they are slightly over half of last year's record highs of nearly $150.
Copper was another commodity that rallied sharply Wednesday despite a huge stock overhang.
In New York, U.S. copper futures' most-actively traded contract, December, finished up 9.90 cents, or 3.4 percent, at $3.0295 a lb. U.S. copper rose above $3 a lb last week, the first time in 13 months.
But high inventories of copper, standing at a near five-month peak of 371,400 tonnes at London Metal Exchange, (LME) warehouses, caused concern to some analysts.
LME's benchmark three-month copper contract ended up $234.50, or 3.6 percent, at $6,664.50 a tonne. The metal, used in power and construction, hit a session high of $6,675.
"I don't expect massive (price) gains because stocks are swollen, "said Andrey Kryuchenkov, base metals analyst at Europe's VTB Capital, who expected LME copper to consolidate to around $6,400 a tonne in the near term.
"We'll sit here range-bound, waiting for more data next week and for the Chinese to come back," he said.
Since the global economy went into decline last year, traders say there has been little demand for copper outside of China, the world's No. 1 buyer for industrial metals.
China imported record volumes of copper in early 2009 but has slowed down in recent months, explaining partly for the spike in inventories, traders say.
U.S. gold futures for December gained 2 percent to close near $1,050 an ounce. Other precious metals that rose sharply in gold's wake included silver, which climbed more than 3 percent, platinum nearly 2 percent and palladium nearly 3 percent.
On the grains front, corn led gains, with U.S. futures contract for December settling up almost 3 percent at $3.79-1/2 a bushel in Chicago trade. Wheat and soybeans rallied as well.
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