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updated: 8/11/2011 2:33 PM

Commodities rise as U.S. jobs report boosts optimism on economy

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Bloomberg News

Commodities rose for the second straight day after an unexpected drop in U.S. jobless claims spurred optimism for the U.S. economy, bolstering prospects for crop and industrial-metal demand.

The Standard & Poor's GSCI Index of 24 raw materials rose 1.9 percent to 642.21 at 2:54 p.m. in New York. Metals including lead and zinc led the rally. Corn, wheat and soybeans jumped after the U.S. government forecast smaller crops. Gold posted the biggest drop in seven weeks.

"Things may not be as bad as some people were predicting," Tom Mangan, who helps oversee $2.8 billion at James Investment Research Inc. in Xenia, Ohio, said in a telephone interview. "The chances of a recession might seem somewhat less today as reflected by stock prices, and, of course, if the economy is going to grow, then demand for commodities will grow."

On Aug. 8, investors dumped equities and most raw materials for the relative safety of Treasuries, the Swiss franc and gold amid mounting concern over a faltering global economy and mounting debt woes in the U.S. and Europe. Today, the Standard & Poor's 500 Index jumped as much as 4.5 percent, and the franc tumbled.

"It's now back a little bit to risk-on trade," said David Thurtell, the head of metal research at Citigroup Inc. in Singapore. The Chinese yuan's jump "is definitely good for commodities as that allows China to import more, and it's a sign that the government is confident enough about the strength of domestic demand and cares less about exports," he said.

The Chinese currency strengthened beyond 6.4 per dollar for the first time in 17 years after the Federal Reserve pledged to keep U.S. interest rates at a record low.

Lead, Corn

In London, lead jumped as much as 5.1 percent. Copper futures in New York climbed 3 percent, the biggest gain since March 17. In Chicago, corn jumped as much as 4.4 percent.

Gold fell 1.8 percent after CME Group Inc. boosted margins on Comex contracts, prompting investor sales following three-day rally to a record topping $1,800 an ounce.

The GSCI index jumped 2.5 percent yesterday, led by precious metals.