Commodities Gain Crude Oil Increases Gold rally

Advances in other commodities including precious metals, oil edged up to its highest level since October 2008, futures rose for a sixth day as gold prices rallied to a record and silver reached a 30-year high. Oil and precious metals strengthened as traders lost confidence in holding currencies as an investment.

Oil ?is getting some inspiration from other markets,? said Phil Flynn, a Chicago-based analyst and trader with investment adviser PFGBest. ?Oil is following gold and the other commodities.?

Crude for December delivery rose 21 cents to $87.06 a barrel on the New York Mercantile Exchange, the highest settlement price since Oct. 8, 2008. Oil has gained 12 percent in the past year. Prices jumped 6.7 percent last week, the most since February.

Brent crude for December settlement rose 35 cents, or 0.4 percent, to $88.46 a barrel on the ICE Futures Europe exchange in London.

Members of the Organization of Petroleum Exporting Countries have signaled they may seek a higher price range for oil as the depreciation of the U.S. currency erodes the purchasing power of their dollar-denominated exports.

The world will ?have to live with current oil prices,? Qatari Oil Minister Abdullah al-Attiyah said today in Doha. Qatar is OPEC?s second-smallest oil producer after Ecuador.

Ali Al-Naimi, the oil minister from Saudi Arabia, OPEC?s largest producer, indicated last week that a range of $70 to $90 a barrel is satisfactory. The kingdom had previously said it preferred a target of $75 a barrel.

Metals

Gold futures for December delivery rose $5.50, or 0.4 percent, to settle at a record $1,403.20 in New York on the Comex. Gold for immediate delivery jumped as high as $1,410.60, also a record.

Silver for December delivery rose 68.4 cents, or 2.6 percent, to $27.432 an ounce. Earlier, the price reached $27.64, the highest level for a most-active contract since March 1980.

The Dollar Index, which tracks the greenback against six major currencies, has dropped 13 percent since June, boosting commodities? appeal as an alternative investment. The currency started a decline before the Federal Reserve announced Nov. 2 it would purchase $600 billion in additional assets to stimulate the economy, a move known as quantitative easing.

The Dollar Index gained 0.6 percent to 77.025 at 3:27 p.m. in New York after dropping to an 11-month low last week.

Euro Under Pressure

The euro has similarly come under pressure as concern mounted that governments in the region will struggle to pay debt. Ireland is seeking support from the European Union this week to avoid a Greek-style bailout as investors shunned buying the country?s bonds. Gold reached a previous record in June when investors were concerned that Greece would go bankrupt.

The Thomson Reuters/Jefferies CRB Index of 19 commodities increased 0.5 percent to 315.25, the strongest level since Oct. 3, 2008. Twelve of the commodities advanced.

?Hedge funds have been helping to kick the market higher after last week?s intervention from the Fed and as demand from China continues to boom,? said Christopher Bellew, senior broker at Bache Commodities Ltd. in London.

Hedge funds increased bullish bets on oil to the highest level since at least June 2006, data from the U.S. Commodity Futures Trading Commission showed last week.

Bullish Bets

Funds and other large speculators increased wagers on rising prices by 8.6 percent in the seven days ended Nov. 2, the CFTC said in its Nov. 5 report. The figures showed bullish bets increased even before the Federal Reserve said it will boost debt purchases to revive the economy.

?The CFTC data from Friday shows that there are still plenty of bulls out there,? said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York.

Oil will fall in coming weeks, with West Texas Intermediate, the grade deliverable against the New York futures contract, returning to between $70 and $80 a barrel, according to Credit Agricole CIB.

?Prices appear to have reacted mainly to increasing financial investment in the commodity sector, decided after the QE2 announcement,? Christophe Barret, a London-based oil analyst, wrote in a report received today, referring to the Fed?s stimulus measures. ?Prices should return to levels compatible with fundamentals in the coming weeks.?

U.S. oil supplies probably gained 1.75 million barrels, or 0.5 percent, last week from 368.2 million barrels, the fourth consecutive increase, according to the median of 10 estimates by analysts surveyed by Bloomberg News. The U.S. Energy Department will report its weekly inventory figures on Nov. 10 in Washington.

Stockpiles were 14 percent above the five-year average in the week ended Oct. 29, the department said last week.

Oil volume in electronic trading on the Nymex was 490,996 contracts as of 3:30 p.m. in New York. Volume totaled 655,239 contracts Nov. 5, 6.8 percent below the average of the past three months. Open interest was 1.49 million contracts.