July 10 (Bloomberg) -- Speculators increased bullish commodity positions by the most in two years as prices rebounded from a bear market, boosted by a crop-damaging drought in the U.S. and moves by China and Europe to spur economic growth.
Money managers raised their net-long positions across 18 U.S. futures and options by 33 percent to 963,447 contracts in the week ended July 3, Commodity Futures Trading Commission data show. While the Standard & Poor’s GSCI Index of 24 raw materials fell 0.3 percent since then, the measure has rallied 10 percent since reaching a bear market on June 21. Gains were led by corn, which climbed 33 percent, and wheat, which surged 22 percent.
The worst Midwest drought since the 1980s is wilting the U.S. corn crop, the world’s biggest, prompting Goldman Sachs Group Inc. to cut its forecast for yields. European Central Bank President Mario Draghi yesterday signaled policy makers may be open to another interest-rate cut after lowering the benchmark rate to a record last week. Chinese officials will intensify their response to an economic slowdown, Premier Wen Jiabao said, the official Xinhua News Agency reported July 8.
“We’re still locked in a risk-on, risk-off battle,” said Dan Denbow, a fund manager at the $1.8 billion USAA Precious Metals and Minerals Fund in San Antonio. “It’s back and forth until there’s clarity on where the economy goes.”
The S&P GSCI index climbed 2 percent this month as the MSCI All-Country World Index of equities dropped 0.7 percent and the U.S. Dollar Index, a measure against six trading partners, advanced 2.1 percent. Treasuries returned 0.8 percent, a Bank of America Corp. gauge shows.
China’s inflation eased to a 29-month low in June, giving policy makers room to take additional steps to spur growth. The Asian country’s government lowered benchmark interest rates on July 5 for the second time in a month. Wen said the nation will “implement a proactive fiscal policy,” Xinhua reported.
Federal Reserve Bank of Chicago President Charles Evans yesterday said the U.S. central bank should move more forcefully to lower the unemployment rate. Speaking at the same conference in Bangkok, Boston Fed President Eric Rosengren said another round of asset purchases is possible to spur growth.
The U.S. central bank bought $2.3 trillion of securities in two rounds of so-called quantitative easing and held borrowing costs at a record low from December 2008 through June 2011, spurring a 92 percent jump in the GSCI commodity index.