Commodities Rally on Bernanke Speech

NEW YORK (AP) -- Commodities rallied Friday along with Wall Street as investors reacted to Federal Reserve Chairman Ben Bernanke's assertion that the central bank will "act as needed" to prevent a credit crunch from hurting the broader economy.

Strong economic growth is key to demand for raw materials such as copper and oil.

Commodity prices rose broadly, with gains in precious and industrial metals, energy and agriculture.

Stuart Hoffman, chief economist of PNC Financial Services Group in Pittsburgh, said he believed the Fed chairman's comments suggested the central bank would cut its benchmark federal funds rate to limit fallout from problems in the financial markets. But he doesn't expect such a move before the Fed's scheduled Sept. 18 meeting.

"If the U.S. economy will be helped, that's going to be good for the global economy and, if all things are equal, demand for basic commodities will be sustained," he said.

Just as important may be what Bernanke did not say: The chairman kept mum about inflation, suggesting that may not be the Fed's top focus in coming weeks. Previously, the Fed has emphasized that inflation was its primary concern.

The absence of inflation-fighting rhetoric in Bernanke's speech gave precious metals bulls a reason to push gold and silver higher, said Mike Zarembski, senior futures analyst with optionsXpress Inc.

"Anything that will keep the economy roaring could lead to inflation," he said.

Investors often turn to precious metals to hedge against inflation. December gold jumped $8 to close at $681.90 an ounce on the New York Mercantile Exchange, while silver for December delivery advanced 27 cents to settle at $12.23 an ounce. Meanwhile, the U.S. dollar fluctuated against other world currencies.

Should the Fed opt to cut interest rates to stimulate the economy, that would support demand for copper and other industrial metals, Zarembski said. Overseas, industrial metals prices climbed on the London Metal Exchange, with nickel leading the group with a 5.3 percent gain. Copper rose 1.4 percent on the LME and gained 4.9 cents to end at $3.397 a pound on the Nymex.

The energy market also moved higher, as traders reacted to a National Hurricane Center forecast saying that a tropical depression could be forming in the Atlantic Ocean. Bullish energy investors tend to pay close attention to any storm that could pose a threat to the U.S. oil infrastructure in the Gulf of Mexico.

Oil prices also were bolstered by a Commerce Department report Friday that showed consumer spending rebounded in July from a weaker June reading and another that said factory orders rose more than expected in July.

Light, sweet crude for October delivery jumped 68 cents to settle at $74.04 a barrel on the Nymex.

October gasoline futures moved 0.48 cent higher to close at $1.9645 a gallon. The September contract, which expired at the session's close, slipped 2.82 cents to $2.0519 a gallon. The Labor Day holiday weekend typically marks the last spike in summer demand for gasoline, which tapers off into the autumn.

On the Chicago Board of Trade, wheat, soybean and corn prices all rose. December wheat surged to a new peak of $8.05 a bushel due to robust demand in a market short of quality wheat. Even after giving back 9 cents to finish the session at $7.755, wheat is up 19.5 percent over the past month and costs nearly twice what it did a year ago.

Corn for December delivery added 0.25 cent to end at $3.40 a bushel, while November soybeans dropped 2.5 cents to settle at $8.825 a bushel.