A surprise U.S. inventory drop helped boost oil towards $60 a barrel on Wednesday, while gold prices hit five-week highs as investors looked beyond renewed appetite for riskier assets and clung to dollar weakness.
The weaker dollar, which hit a four-month low against a basket of currencies, propped up base metals including copper but a growing sense that market optimism might be overdone was seen limiting those gains.
Investors have increasingly bought into global stock markets , in a reflection of reinvigorated appetite for risk as markets ponder possible stabilisation of the economic slump and the timing of a fledgling recovery.
But signals are conflicting.
The Baltic Index, often read by some as a leading indicator has stormed towards its highs for the year, but analysts are saying the vital re-stocking process going on in commodity consuming giant China is probably coming to an end.
"For most commodities we're run a little bit ahead of ourselves," said Andrey Kryuchenkov, commodities analyst at VTB Capital in London.
"Certainly things are better than they were, but it doesn't mean we're out of the woods yet, we're in the midst of a very serious crisis," he added.
Industrial output in China rose less than expected last month, tempering optimism on demand and offering a reminder that talk of a recovery might be premature.
Also, an article in the Financial Times touched on the risk of the United States losing its triple-A credit rating and refocused attention on rising U.S. debt issuance.
$60 OIL IN SIGHT
By 1049 GMT, U.S. crude for June was up 0.9 percent on the day at $59.41 a barrel. It climbed to an intraday peak of $60.08, the highest since November, on Tuesday.
U.S. crude inventories fell 3.1 million barrels last week, the American Petroleum Institute said on Tuesday, against a forecast of a 1.4 million-barrel increase in a Reuters poll of analysts.
"The unexpected draw in crude oil stocks in the APIs last night is clearly behind this move," said Christopher Bellew, an oil broker at Bache Commodities in London.
"Although crude stocks are high, there is an incentive to hold stocks with low interest rates and big contangos (discounts for prompt oil). So it looks as if oil has achieved some sort of equilibrium even though the recession is still with us."
Oil and gold were buoyed by a weaker dollar, showing a revival of the traditional inverse correlation that had broken down rapidly as markets moved lock-step with attitudes toward risk.
Spot gold stood at $923.40 an ounce, having earlier hit a five-week high at $928.30, while U.S. gold futures for June delivery were firmer at $924.10 an ounce.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings stood at 1,104.09 tonnes as of May 12, unchanged since May 6.
Three-month copper on the London Metal Exchange rose 0.3 percent to $4,594.00 per tonne.
On the data front traders were waiting April retail sales data and March business inventory figures due later in the day would also provide more clues on the health of the U.S. economy.
