Commodities Daily 15th Jan 2008

Spotlight: Gold reached yet another record high as a declining dollar and expectations of further interest rate cuts spurred buying. Corn rose to the highest ever in Chicago while soybeans and feeder cattle fell. U.S. steel prices may rise more quickly than anticipated to $600 a ton. Cocoa rose to the highest price since 2003.

Energy: Crude oil rose for the first time in four days after the dollar fell to within a cent of its all-time low against the euro, prompting investors to buy energy and metals futures as an inflation hedge. The euro settled at 1.4869 against the dollar yesterday. A 2 percent gain in heating prices also prompted traders to buy oil as colder weather shut schools and cancelled flights in Boston. In a survey of analysts, crude oil inventories probably gained 1.3 million barrels last week as refiners reduced output from a four-month high and imports rose. Gasoline and distillate inventories also gained, according to the survey.

Agriculture: Corn soared to record high levels yesterday as investors bought on speculation that global demand for feed and biofuel will exceed production for the seventh time in the past eight years. Corn futures for the active month March settled at 512 cents a bushel, up 17 cents from the previous limit-up session on Friday. Wheat futures ended slightly higher as traders continue to buy the new crop months July, narrowing the old/new crop spread. March wheat rose 7.75 cents to 917 cents a bushel while July limit-up for a second straight session, settling at 836 cents a bushel. Soybeans fell from a record high as U.S. and South American farmers increased sales to benefit from prices that rose 78 percent last year.

Precious Metals: Gold futures set new record highs yesterday, reaching a high of $915.90 an ounce before settling lower in earlier trade as a declining dollar increased demand for precious metals. The dollar fell as traders increased bets that the Federal Reserve will lower U.S. interest rates to avoid a recession. Fed funds futures contracts on the Chicago Board of Trade show 54 percent odds the Fed will cut its 4.25 percent target rate for overnight bank loans to 3.75 percent at its Jan. 30 meeting.

Industrial Metals: Copper rose for a second straight session as a weaker dollar increased the demand for raw materials as a hedge against inflation. Copper however, remains weighed down by increasing stockpiles and a stabilizing U.S. demand. Stockpiles monitored by the Comex have plunged 61 percent in the last year. Inventories tallied by the London Metal Exchange have dropped 0.4 percent in the past 12 months.