Commodities steadied on Friday in Asia as crude oil, spot gold and silver pared back some of the dizzying losses suffered on Thursday when worries over global growth in a market ripe for profit taking combined to cause a widespread rout.
Brent crude <LCOc1> bounced back to above $112 after falling by a record $12 to below $110 at one point during Thursday's bloodbath. However, the rally wavered as European markets opened and both Brent and U.S. crude futures swung lower.
Gold and silver rose around 1 percent, giving up earlier highs, as cheaper prices lured some bargain hunters not ready to call an end to the two-year rally in commodities.
Investors eyes are shifting their focus now to U.S. jobs data due later on Friday to gauge if concerns over the health of the world's biggest economy are misplaced or not.
Global manufacturing growth eased in April, JP Morgan said, and the services sectors in both the United States and Europe cooled, adding to data that suggests some faltering in the world's recovery from the global financial crisis.
"From a fundamental point of view, people are really starting to question where the U.S. economic recovery is and whether asset prices should be at such high levels," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney.
"Is the U.S. economy going to fall flat or behave itself? People are starting to rethink."
Not everyone was convinced that worries over global economic growth was the spark for the commodities selloff that pushed the 19-commodity Reuters-Jefferies CRB index down 5 percent for its fifth biggest one-day fall on record.
Some pointed to silver, which dropped almost $5 an ounce on Thursday for its biggest one-day drop since 1980, as showing the risks of holding frothy commodities, especially after margins on trading COMEX silver futures have risen so sharply. [ID:nN04107715]
The precious metal hit a record high just last Thursday close to $50 but has since slumped almost 30 percent, an uncomfortable reminder of the panic selling in 1980 when an attempt to corner the market by two Texas oil tycoons fell apart.
Still, some strategists say the silver market lacks the clout to trigger a widespread selloff in the commodities sector; it's just a twelfth of the size of global oil futures.
Others pointed to big speculative positions in oil that suggested the market was vulnerable to a selloff and so the fall in crude futures had prompted the wider losses and helped to give the dollar a lift. Others were left baffled.
"There's no real and convincing reason for the sudden sell-off in risky assets," said Yingxi Yu, commodity analyst at Barclays Capital. "This was mainly a sentiment-driven correction."
In Asia, spot gold rose almost 1 percent to $1,485.19 an ounce, snapping a four-day losing streak. Spot silver gained 1 percent to $35.02.
Asian buyers searched for bargains in the aftermath of Thursday's slump with interest from Indonesia, India and Thailand to buy physical gold, although dealers said supply of the metal was still tight.
"I guess everyone thinks we have tonnes of gold bars lying around that buyers can just grab and go, and worst of all, they are still shopping for bargains," said a physical dealer in Singapore.
"But we dare not commit for anything that will not be on the shelf for them or will arrive later than next Wednesday," he said, referring to tight gold supplies in Singapore.
OIL RALLY SHORT LIVED
Brent halted Thursday's record fall by bouncing as much as 1.7 percent in Asia to as high as $112.65 a barrel. U.S. crude <CLc1> gained over 1 percent.
However, the rallies were shortlived as both crude futures markets turned lower as European markets kicked in.
Unrest across Arab nations had encouraged investors into oil since the start of the year, driving Brent to a 2-1/2 year high of $127 last month.
But with hedge funds placing a record number of bets on higher U.S. crude prices as of last week, many had warned some investors were ready to take profits.
A slide in the value of the dollar this year and loose U.S. monetary policy have helped boost commodities to multi-year peaks in recent months, although conversely on Thursday traders suggested the unwinding of commodities positions aided the dollar.
The dollar held steady on Friday in Asia. The dollar index against a basket of other major currencies was at 74.025, versus 74.194 on Thursday, when the index rose 1.6 percent.
The United States releases its April jobs report at 1230 GMT. The report is expected to show that April payrolls rose 186,000, pulling back from the March increase of 216,000, which was the biggest increase in 10 months.
