Copper Leads Commodities Rebound on Speculation Rally Not Over

May 23 (Bloomberg) -- Commodities rebounded, led by copper and silver, on speculation a rally that drove prices to records isn't over as demand for some raw materials exceeds production.

Copper climbed 6 percent, its largest increase since May 11, silver rose the most in two weeks and gold gained for the first session in five. Oil topped $70 a barrel for a first session in four. Commodities posted their biggest declines in 25 years last week as some investors bet prices were exaggerated.

``The underlying fundamentals of supply and demand around the world remain the same,'' Charles ``Chip'' Goodyear, chief executive officer of BHP Billiton, the world's largest mining company, said in a teleconference today. ``We are seeing very good economic conditions around the world, the supply side is still struggling to keep up.''

Copper for delivery in three months jumped as much as $615 to $8,195 a metric ton on the London Metal Exchange. Earlier it fell as much as 2.3 percent to $7,405. Silver for immediate delivery gained as much as 55 cents, or 4.4 percent, to $13.07 an ounce, recording the biggest daily gain since May 9.

Crude oil soared $1.76, or 2.5 percent, to $70.99 a barrel, a level last seen May 17. The Reuters/Jefferies CRB Futures Price Index of 19 commodities, including base and precious metals, rose 2.07, or 0.6 percent, to 346.28. The index declined to a one-month low of 337.54 on May 19.

Commodities declined last week as speculative investors cut their holdings on concern global interest rates will increase, curbing demand. Copper dropped as much as 9 percent on May 15, its biggest one-day decline since October 2004. Gold fell 8.3 percent last week.

Declining Dollar

Speculation the dollar may extend declines against the euro and yen boosted precious metals as an alternative investment today.

``People are looking for opportunities to exit the dollar into something safer,'' said James Turk, founder of GoldMoney.com. ``Commodities are benefiting as a general rule, and I think gold and silver moved up in part because people are exiting the dollar.'' Shares of mining companies rallied. BHP Billiton surged as much as 8.3 percent, the largest daily increase since March 2001. Anglo American Plc, the world's No. 2 miner, soared 8.3 percent, the biggest since March 2003.

Price swings in commodities including copper will continue because of buying and selling from speculators, said Peter Hollands, managing director of U.K. consulting company Bloomsbury Minerals Economics Ltd.

``Conditions like this will probably prevail for another year,'' Hollands said.

*Information courtesy of Bloomberg.com

Last Updated: May 23, 2006 10:14 EDT