Most commodities bounced back on Tuesday from steep losses in volatile markets as investors hoped the U.S. Federal Reserve would announce steps to boost the economy and stave off global recession.
Brent crude oil clawed back from a six-month low into positive territory, while copper pulled away from an eight-month low as bargain hunters prowled the markets. Gold touched successive all-time peaks as jittery investors sought a safe haven.
The 19-commodity Reuters-Jefferies CRB index rose 0.7 percent after tumbling on Monday to its lowest level in nearly eight months.
The downgrade of the United States' credit rating on Friday, along with a raging debt crisis in Europe, triggered a sell-off that had knocked nearly 10 percent off the price of U.S. crude in just two days and sent other commodities tumbling.
But markets bounced on hopes the U.S. central bank would signal later in the day it would take additional steps to stimulate the economy following previous shots of liquidity through so-called quantitative easing (QE).
The Fed will deliver its policy statement around 2:15 pm (1815 GMT).
The market would likely be wary of any stimulus after previous rounds only temporarily boosted asset prices without addressing underlying problems in the economy, said said Sean Corrigan, chief investment strategist at Diapason Commodities Management in Switzerland.
"Given the signal failure of the last QE2 to do anything other than push prices up for ordinary people... there's a different level of expectation about its efficacy and advisability," he said.
"One doesn't want to heap too much extra bearishness on a world which has had a bit of a shock in its expectatations over the past couple of weeks, but to me this is a market catching up with the underlying reality."
Investors have been counting on China's economic strength to support commodity demand when the Western world is on shaky ground. But data on Tuesday showing China's inflation, speeding to a higher-than-forecast 6.5 percent in July, suggests Beijing may have limited room to stimulate domestic growth.
"It's crucial for commodity markets that China doesn't slide. Fears of a China slowdown would really take the wind out of the markets," said Citigroup analyst David Thurtell.
In a whipsaw market, oil prices plumbed fresh depths on fears about a global recession before reversing direction.
The worries about global growth and the impact on commodities demand pushed Brent crude briefly below the $100 per barrel level.
"The underlying fundamental is that demand in Europe and the U.S. is not strong, we have a sell off in equities and confidence in the global recovery has been hit again," said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.
Brent crude LCOc1 fell as much as $5 to $98.74 a barrel, the lowest intraday price since Feb. 8, before erasing losses and trading 0.3 percent higher at $104.08 by 1350 GMT, still over $20 off an April peak above $127.
U.S. crude CLc1 plunged nearly 7 percent to $75.71, its lowest since September 2010 before also bouncing. At one point, U.S. crude's discount to Brent CL-LCO1=R rose to its highest ever, reaching a peak of $23.76.
Industrial metals also rallied as copper bounced from eight-month lows, bolstered by consumer buying.
Benchmark three-month copper on the London Metal Exchange rebounded from $8,446.25, a fall of 4.7 percent, its lowest level since early December 2010, to gain 0.4 percent.
Aluminium rose 1.7 percent to $2,419 a tonne and nickel added 1.5 percent to $21,575.
"Regardless where you are, some of these commodities do represent a reasonable value," said Jonathan Barratt, managing director of Sydney-based Commodity Broking Services.
GOLD ROARS AHEAD
Early in the day when other markets were deepening losses, gold kept up its blistering rally, staging its biggest three-day rally since late 2008 during the global financial crisis.
Spot gold hit a record $1,778.30 an ounce as investors sought refuge in the safe haven asset from chaos in other markets. That marked its 12th record in 20 sessions.
As other markets recovered, gold pared gains to around $1,735 an ounce.
"The market could come off from here, but it's headed in a northerly direction," said ANZ head of metal sales Peter Hillyard. "From where we are now, you might think we could see some sort of pull-back. But I'm talking about a momentary thing, a pull-back like the loading of a gun, which then fires away."
In agricultural markets, U.S. wheat recovered from losses as low prices generated buying interest, while corn and soybeans pulled back from their lows.
"I have also seen a steady stream of buying orders for wheat on my desk as people view the present low market as a buying opportunity," a European trader said.
Sugar, coffee and cocoa futures also rebounded. (Additional reporting by Amanda Cooper, Harpreet Bhal, Simon Falush, Naveen Thukral, Lewa Pardomuan; editing by Anthony Barker and Keiron Henderson)