High-price balancing act

6 January 2011 By Ian Campbell

Despite good economic news, commodities have wobbled this week. Oil, food and metals prices all thrived on a weak dollar and low interest rates. But growth, inflation and higher interest rates point to a firmer dollar and tighter liquidity. Commodities may be volatile in 2011.

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The ReutersJefferies CRB commodities index fell by 1.6 percent on Jan. 4, its biggest oneday fall since midNovember. Gold for February delivery fell to $1,374 per ounce on the New York Mercantile Exchange, its lowest since Dec. 16.

The Institute for Supply Management in the U.S. said on Jan. 4 that its nonmanufacturing sector index for December rose to 57.1, the highest since May 2006 and its 12th straight month of expansion.

Germany's services sector grew rapidly in December, according to Markit's purchasing managers' index. A revised reading of 59.2 for December was well above the 50 level that separates growth from contraction. The manufacturing PMI also showed rapid growth in December and the highest reading for recruitment by manufacturers since the survey began in April 1996.

The U.S. dollar rose broadly on Jan. 6 to a twoweek high against the Japanese yen of over 83 yen per dollar. The euro fell to its lowest in more than a week at close to $1.31.

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