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Prices head for biggest weekly rise in more than three years

NEW YORK -- Commodities jumped on Friday, headed for their largest weekly gain in more than three years as base metals roared higher after Glencore pledged to slash zinc output and gold hit three-week highs after dovish Federal Reserve minutes.

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NEW YORK -- Commodities jumped on Friday, headed for their largest weekly gain in more than three years as base metals roared higher after Glencore pledged to slash zinc output and gold hit three-week highs after dovish Federal Reserve minutes.

Surging metals offset a choppy oil market. Brent, the global benchmark, slipped on Friday under pressure from bargain hunting at the end of a big weekly increase.

Base metals were "explosive" after Glencore's surprise announcement it will cut zinc output by 500,000 metric tons a year, removing 4 percent of global capacity, INTL FCStone analyst Ed Meir said.

The news unleashed a wave of short covering across the London Metal Exchange as investors unwound bearish bets on weaker prices and ballooning oversupply as economic growth slows in China, the world's top consumer. Technical buy signals accelerated the gains.

Zinc soared as much as 12 percent for its biggest one-day gain in at least a decade. It lifted the rest of the base metals, with lead up almost 5 percent and nickel rising over 3 percent. Concerns about an overhang of inventories had pushed prices last month to their lowest in more than five years.

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A weaker dollar buoyed other raw materials markets, a day after the Federal Reserve released September meeting minutes that reinforced expectations the central bank will hold off on any U.S. interest rate hike until well into 2016.

"After a harsh selloff in commodities followed up by the recent weakness for global equities over global growth concerns, we are now having a risk-on trade," said Chris Jarvis, commodities analyst at Caprock Risk Management in Frederick, Maryland.

The 19-commodity Thomson Reuters/Core Commodity CRB Index, a global benchmark for commodities, was up 4.5 percent on the week by 11:03 a.m. EDT (1503 GMT), its biggest advance since June 2012. For the session itself, the CRB rose nearly 1 percent, touching its highest daily level since end-July.

Raw sugar hit seven-months highs and arabica coffee seven-week peaks as dry weather in Brazil fed expectations for tighter supplies. Wheat, corn and soybeans ticked higher ahead of a U.S. government supply-demand report.

The U.S. dollar index hit a three-week low as commodity and growth-based currencies such as the Australian, Canada and New Zealand dollar rose. U.S. equities rallied.

Gold, often viewed as an alternative to the dollar, hit three-week highs, up more than 1 percent to $1,153 an ounce.

Hamza Khan, head of commodities strategy at ING Bank expects gold to rally late June highs of around $1,200 by next week if the bets against a U.S. rate hike persist.

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