COMMODITIES-Oil, metals start year strongly after US fiscal deal

Wed Jan 2, 2013 3:25pm EST

* Late Tuesday vote in U.S. Congress empowers markets
    * Oil and copper hit 11-week highs, gold at 2-week peak
    * Strong tone expected this week, then volatile markets


    By Barani Krishnan
    NEW YORK, Jan 2 (Reuters) - Commodities prices made a
powerful start to the new year, with oil, gold and copper
hitting multi-week highs on Wednesday after the U.S. Congress
passed a bill to partially resolve a fiscal crisis in the
world's largest economy.
    Sugar and coffee prices rose too as the dollar fell, making
commodities priced in the U.S. currency cheaper for euro and yen
holders, after a vote in the House of Representatives averted
tax increases for many Americans. 
    Congress decided late on Tuesday to raise taxes on wealthy
individuals and families, sparing middle- and low-income
earners. But it left unresolved another sticky issue involving  
  $109 billion in planned military and domestic spending cuts,
promising more political showdowns on the budget in coming
months. 
    "Failing to put anything on the table dealing with spending
cuts or entitlement reform, means that investors will likely see
more roller-coaster action," said Edward Meir, a commodities
analyst at Intl FC Stone in New York.
    "For now, however, the buyers are firmly in charge of the
asylum," Meir wrote in a note. He expects a "stronger tone" for
the rest of the week.
    Wheat and soybeans also began 2013 positively, although a
lack of follow-through buying pushed their prices lower. The two
markets were the biggest gainers last year, rising more than 18
percent.  

    
    
    OIL FURTHER BOOSTED BY CHINA, MIDDLE EAST
    In oil trading, London's benchmark Brent crude ended
up 1.2 percent at $112.47 a barrel, after surging earlier to a
11-week high of nearly $112.90.
    Brent finished up 3.5 percent in 2011. It averaged more than
$111.65 per barrel through the year, the highest annual average
on record, as geopolitical threats to production offset worries
about flagging oil demand. 
    U.S. crude settled up 1.4 percent for the session at
$93.12 a barrel. It hit an intraday high of $93.87 a barrel, the
highest since Sept. 21. For 2011, U.S. crude gained 7
percent. 
    The U.S. fiscal deal aside, oil found support from robust
data out of China pointing to a recovery in the world's
second-largest economy and No. 2 oil consumer.
    China's official manufacturing purchasing managers' index
held steady in December at 50.6, according to data issued on
Monday -- adding to evidence that its economy had picked up in
the last three months of 2012 after slowing for seven straight
quarters. 
    Other positive sentiment came from Wednesday's data showing
a rebound in U.S. manufacturing activity in
December.  
    Tensions in the Middle East -- which produces the bulk of
the world's oil -- helped crude prices too.
    Fourth largest oil exporter Iran was carrying out naval
drills in the Strait of Hormuz, a waterway Tehran has threatened
to block if it comes under military attack over its disputed
nuclear program. Some 40 percent of the world's sea-borne oil
exports pass the strait. 
    
    METALS DOMINATE COMMODITY GAINS    
    Metals dominated gains on the 19-commodity Thomson
Reuters-Jefferies CRB index, with four of the top five
markets for the day being aluminium, nickel, silver and copper.
Aluminum and lead -- another industrial metal
used for battery making -- rose more than 4 percent each in
their biggest price gain in three months. 
    Copper, like oil, hit 11-week highs. The metal's futures
rose more than 3 percent in London to close at $8,210 a
tonne, and up more than 2 percent in New York to settle
at $3.74 a lb. It was the biggest daily rise since September in
copper. Last year, copper finished up 4 percent.
    Part of those gains were driven by renewed confidence in
demand from China, the world's largest buyer of metals.
    "The other big thing for the metals market is a strong
rebound in China that could be underway; the data is pointing to
that," said Robin Bhar, a metals analyst in London for Societe
Generale.
    In precious metals, the spot price of bullion rose
0.7 percent to hover above $1,687 an ounce, near a 2-week high.
Gold futures settled up 0.8 percent at $1,688.80. 
    In India, the No. 1 market for bullion, gold futures notched
 their highest gains in two weeks after the finance minister
hinted at making imports more expensive, triggering speculative
buying from physical traders. 
    India's central bank has also asked that volume and value
restrictions be placed on gold imports by banks and agencies
such as MMTC to help rein in a current account gap,
which touched an all-time high in the July-September quarter.
 
    
 Prices at 3:07 p.m. EST (2007 GMT)      
                             LAST/      NET    PCT     YTD
                             CLOSE      CHG    CHG     CHG
 US crude                    92.88     1.06   1.2%   -6.0%
 Brent crude                112.30     1.19   1.1%    4.6%
 Natural gas                 3.233   -0.118  -3.5%    8.2%
 
 US gold                   1688.80    13.00   0.8%    7.8%
 Gold                      1687.90    13.36   0.8%    7.9%
 US Copper                  373.60     8.35   2.3%    8.7%
 LME Copper                8209.00   278.00   3.5%    8.0%
 Dollar                     79.842    0.073   0.1%   -0.4%
 
 
 US corn                    698.25    -9.25  -1.3%    8.0%
 US soybeans               1418.75   -14.25  -1.0%   18.4%
 US wheat                   755.25   -22.75  -2.9%   15.7%
 
 US Coffee                  149.40     5.60   3.9%  -34.5%
 US Cocoa                  2259.00    23.00   1.0%    7.1%
 US Sugar                    19.69     0.18   0.9%  -15.2%
 
 US silver                  31.007    0.780   2.6%   11.1%
 US platinum               1565.10    26.40   1.7%   11.4%
 US palladium               707.95     4.60   0.7%    7.9%
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