Commodities Head for Biggest Monthly Rally in 34 years

Commodities rally as expected. Just that there will be no recovery for the economy and the stock market. This is a bear market rally and it will end.

May 29 (Bloomberg) — Commodities headed for the biggest monthly rally in 34 years, led by energy, as the slumping dollar boosted demand for raw materials as a hedge against inflation.

In May, the Reuters/Jefferies CRB Index of 19 energy, metal and agricultural prices has gained 13 percent, the most since July 1974. The dollar headed for the biggest monthly drop this year against a basket of six major currencies.

Signs of a recovery in the global economy have spurred demand for fuel, industrial metals and crops. Crude oil was poised for the biggest monthly gain in a decade, and gasoline has soared more than 30 percent in May. Gold, silver and copper surged, while corn and soybeans reached the highest since September.

“The belief that the world economy is not going down into a black hole anymore has brought a lot of investors back in,” said Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Management in Cincinnati. “You also have the threat of inflation and that means that people just want to have hard assets.”

The CRB index gained 1 percent to 252.36 at 10:54 a.m. in New York. The dollar was poised for the third straight monthly drop against the currency basket, partly on demand for assets with higher returns.

Investors are seeking a “safe haven from a weaker dollar,” said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. “This rally is sustainable, given prospects of the dollar, which is expected to weaken along with other industrialized countries’ currencies.”

To contact the reporters on this story: Halia Pavliva in New York at [email protected]; To contact the reporter on this story: Millie Munshi in New York at [email protected];

Last Updated: May 29, 2009 10:56 EDT
By Halia Pavliva and Millie Munshi

Source: Bloomberg

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