Surge in stocks, drop in dollar, higher inflation data drives demand for gold, copper, oil

Commodities higher as stocks soar, dollar falls

NEW YORK — Surging stocks, a weaker dollar and a higher-than-expected reading on inflation set the stage for higher commodity prices Wednesday.

Gold, copper, oil and other futures made big jumps as investors’ appetite for risk grew on the belief that an improving economy will boost demand for basic materials.

Signs of increased risk-taking abounded on Wednesday as safe-haven assets like the U.S. dollar and Treasurys fell, while stocks soared on an upbeat forecast from Intel Corp.

Investors saw the computer chip maker’s results as a signal that computer sales are picking up and that consumers are starting to open their wallets again. Major market indicators jumped about 3 percent, including the Dow Jones industrial average, which gained 256 points.

Meanwhile, government data showed consumer prices shot up in June by the largest amount in 11 months, driven by a huge spike in gasoline prices. The Labor Department said inflation at the consumer level rose by 0.7 percent last month, slightly more than the 0.6 percent increase that economists forecast.

The bigger-than-expected jump in inflation supported higher commodity prices. Investors often use gold as a hedge against inflation. At the same time, other commodities tend to rise if investors believe prices will increase.

The big jump in consumer prices, however, was seen by most analysts as fleeting. When compared with year-ago figures, prices in June were actually down by 1.4 percent — the biggest year-over-year decline in nearly six decades.

With the economy still weak, inflation is not expected to be a major problem any time soon.

“As far as I can tell, the inflationary pressures are temporary, if anything,” said Tom Pawlicki, commodities analyst with MF Global Research in Chicago. “I don’t see the economy recovering all that strongly right now.”

Pawlicki called the uptick in metals and energy prices on Wednesday “short-sighted.”

“It’s (based) more on risk appetite than on anything else,” he said.

Gold for August delivery rose $16.60, or 1.8 percent, to settle at $939.40 an ounce on the New York Mercantile Exchange.

Other precious metals also rose. September silver jumped 35.3 cents, or 2.7 percent, to $13.2080 an ounce, while July platinum gained $22.90, or 2 percent, to $1,151.30 an ounce.

September copper futures jumped 9.3 cents, or 4 percent, to $2.3920 a pound. Aluminum prices soared 3.1 percent.

Oil prices climbed above $61 a barrel, buoyed by the surge in the stock market and a government report showing U.S. crude supplies fell more than expected last week. Still, crude inventory levels remain high — about 16.5 percent above last year’s levels.

The jump in oil comes after more than a week of prices hovering around $60 a barrel as investors questioned whether a sharp run-up in prices this spring was warranted given the still weak economy.

Light, sweet crude for August delivery rose $2.02 to $61.54 a barrel.

In other Nymex trading, gasoline futures rose 6.15 cents to $1.7081 a gallon, while heating oil futures rose 7.02 cents to $1.5821 a gallon.

On the Chicago Board of Trade, grain prices were mixed.

September wheat futures added 4.75 cents to $5.3475 a bushel, while corn for September delivery fell 9 cents to $3.2950 a bushel.

August soybeans lost 14 cents to $10.2050 a bushel.