COMMODITIES-Metals rally on US data, gold holds near highs

Trade the News

Thursday September 09, 2010 03:05:15 PM GMT

* Oil gains, metals recover some losses on U.S. jobs data

* Report of Chinese probe sparked early sell-off#

* Gold steadies from data-led losses, holds near highs

(Changes dateline from SINGAPORE, byline, adds quotes, updates prices)

By Dmitry Zhdannikov

LONDON, Sept 9 (Reuters) - Oil extended gains on Thursday, while metals cut earlier losses after stronger than expected U.S. jobs data helped offset negative sentiment linked to a sharp fall in Chinese commodity markets.

Gold, hovering a few dollars off the record highs seen in June at $1,264.90 an ounce, slipped towards $1,250 per ounce after data showed jobless claims fell more than expected, calming fears that economic growth was slowing sharply and reducing the metal's safe-haven appeal.

Oil rose above $75 a barrel, hitting a three-week high, drawing strength from an initial report of falling U.S. inventories and the U.S. jobs data.

U.S. crude for October gained 93 cents to $75.16 a barrel, having earlier hit $75.86, its highest level since Aug. 19. Brent crude gained 38 cents to $78.55.

Industrial commodities had fallen sharply earlier as talk of Chinese authorities launching a probe into the rubber market triggered a sell-off in Chinese commodities, rippling through to London Metal Exchange prices.

Copper clawed back from a one-week low, rallying in tandem with rising equities and dollar weakness, but short term sentiment remained weak.

"For the next couple of weeks prices could move lower on the potential of this investigation," said John Meyer, analyst at Fairfax.

Benchmark copper for three months delivery on the London Metal Exchange was down 1.08 percent at $7,591.75 a tonne by 1418 GMT, versus $7,675 a tonne at the close on Wednesday.

The metal is widely used in wiring and the construction sector.

Traders said the fundamental picture for copper was solid and its previous weakness was mainly due to the Chinese probe.

"We're (still) looking for copper to move through $8,000 a tonne this year," Meyer said.

CHINESE REGULATORS

Chinese regulators have repeatedly tried to crack down on trading practices that could lift prices for the raw materials that feed the country's vast manufacturing economy.

"The concern is that this could happen in other commodities or is already happening," said an LME trader. "If that's the case and if you're long you'd rather take the profit and move out now," he added.

Shanghai's most active rubber contract closed at 25,445 yuan, down 3.8 percent, after having hit a two-year high in early trade.

London Metal Exchange zinc was stung by the Chinese report, trading 2 percent down at $2,178. Prices had earlier shed 6.5 percent to $2,075.25.

"This (Chinese probe) is going to scare speculators out of their wits. We heard stops in LME zinc placed at $2,190 were not filled until $2,140 because the fall came so fast and there were so few buyers," a commodities trader in Singapore said.

Wheat prices rose on the Chicago Board of Trade with the benchmark September contract gaining 0.8 percent to $6.84 a bushel as Russia said it may harvest just over 60 million tonnes of grain in 2010 -- near the bottom range of official forecasts.

The United States said its wheat exports may rise to up to 37 million tonnes in the 2010/11 year from 24 million tonnes in 2009/10 after Russia imposed a ban on its grain exports (Additional reporting by Nick Trevethan in Singapore; Writing by Dmitry Zhdannikov, editing by Anthony Barker)

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