Gold and zinc surged to their highest in over three months on Thursday, buoyed by a tumble in the dollar, while oil failed to build on sizzling gains in the previous session as doubts grew about whether producers would agree to cut output.
The dollar tripped to its lowest levels in three months against a basket of currencies, supporting commodities priced in the U.S. currency by making them cheaper for buyers outside of the United States.
A collapse in expectations of a further rise in U.S. interest rates this year drove the dollar index to its biggest daily fall in over two months on Wednesday.
"The (Fed funds futures) now sees only a 12% probability of a rate hike in March so I am not expecting the price of gold to drop soon," said Bernard Dahdah, an analyst at Natixis, adding he expected it to trade around current levels in the next two months. Spot gold touched $1,147.40 an ounce on Thursday, its highest since Oct. 30, after rallying 1.2% on Wednesday, the biggest daily gain since Jan. 20.
Rising U.S. rates make a non-yielding asset such as gold less attractive.
Gold has now gained nearly 8% since the start of this year as uncertainty about the health of the global economy has made financial markets volatile, pushing investors into safer assets.
Gold helped the Thomson Reuters Core Commodity Index to edge up by 0.2% after a gain of 2.5% on Wednesday.
The index of 19 commodities is down nearly 7% this year after dropping by a quarter in 2015 to hit its lowest level since 2002 in December, as commodities ranging from iron ore to oil took a battering.
Industrial metals also rallied on Thursday.
Benchmark zinc on the London Metal Exchange surged to a peak of $1,726.50 a ton, the strongest since Oct. 29, on concern about potential shortages.
The wider metals market, including copper and aluminum, got support from the weak dollar and investors closing out bearish positions before the Lunar New Year holiday in China.
Oil, however, failed to build on Wednesday's 7% jump.
Brent crude dipped below $35 a barrel, pressured by oversupply and scepticism that Venezuela's effort to lobby crude producers for output cuts would succeed.
Prices have gained almost 30% since falling to $27.10, the lowest since November 2003, on Jan. 20.
"It's a non-starter," Carsten Fritsch, analyst at Commerzbank, said of Venezuela's effort. "Without Saudi Arabia it would not make sense anyway."
In agricultural markets, U.S. corn and soybean prices edged higher with support from the falling dollar, but favorable weather for South American crops helped keep prices shy of six-week highs hit this week.