Commodities rebound after record selloff

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GOLDEN REBOUND: The precious metal rose on Monday after the worst one-week fall in over a quarter of a century. (Getty Images)

Commodities rebounded in Monday’s trading with precious metals and agricultural futures clawing back some of the gains lost in last week’s sector-wide selloff.

Gold futures for April delivery on the COMEX division of the New York Mercantile Exchange (NYMEX) rose $5.6 an ounce to $924.3 as bargain hunting investors sought to capitalise on the losses suffered by the precious metal last week.

The historical dollar hedge had slumped to a low of $904.65 last week, falling over 10% from its non-inflation adjusted all time high of $1,030.80 an ounce on March 17.

Oil did take some of the lure off gold as a hedge against the dollar with crude prices falling 48 cents to rest on $100.38.

Typical profit taking ahead of the end of the first quarter contributed to the widespread losses in commodities, the strongest performing sector of the year, with gold among the worst hit last week, posting the largest weekly decline in a quarter of a century.

The effect of hedge funds unwinding positions in commodities to cover margin calls in other markets was compounded by a brief return of confidence in the dollar on the back of actions taken by the US Federal Reserve.

The intervention of the Fed in the Bear Stearns bailout and its interest rate cuts on March 15 and again on March 18 provided some strength for the greenback, which rallied against the euro in last week’s trading.

The short-term bounce for the dollar, however, stalled on Monday as it fell against both the euro and the yen with investors expecting the lingering credit crisis to continue weighing on the US economy.

Silver also recouped some of last week’s losses in Monday’s trading, finishing up over 2% to close at $17.47.

In the agricultural markets, corn, sugar, wheat, coffee and soybeans all finished the day higher.

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