COMMODITIES-Oil and metals start year strongly after US fiscal deal
* Late Tuesday vote in U.S. Congress empowers markets
* Expect strong tone this week, more volatility later
* Oil and copper hit 11-week highs, gold at 2-week peak
NEW YORK, Jan 2 (Reuters) - Commodities prices made a powerful start to the new year, with oil, gold and copper hitting multi-week highs on Wednesday after the U.S. Congress passed a bill to partially resolve a fiscal crisis in the world's largest economy. Sugar and coffee prices rose too as the dollar fell, making commodities priced in the U.S. currency cheaper for euro and yen holders, after a vote in the House of Representatives averted tax increases for many Americans. Congress decided late on Tuesday to raise taxes on wealthy individuals and families, sparing middle- and low-income earners. But it left unresolved another sticky issue involving $109 billion in planned military and domestic spending cuts, promising political showdowns on the budget in coming months.
Edward Meir, a commodities analyst at Intl FC Stone, said Congress was "uninspiring" in its handling of the issue and "failing to put anything on the table dealing with spending cuts or entitlement reform, means that investors will likely see more roller-coaster action. "For now, however, the buyers are firmly in charge of the asylum," Meir wrote in a note. He expects a "stronger tone" for the rest of the week. Wheat and soybeans also began 2013 positively, although a lack of follow-through buying pushed their prices lower. The two markets were the biggest gainers last year, rising more than 18 percent.
OIL FURTHER BOOSTED BY CHINA, MIDDLE EAST In oil trading, London's benchmark Brent crude surged almost 2 percent to an 11-week high of nearly $113 per barrel, before easing back to around $112 by 1700 GMT. Brent averaged more than $111.65 per barrel last year, the highest annual average on record, after geopolitical threats to production offset worries about flagging oil demand. It finished up 3.5 percent for 2011. U.S. crude rose around 2 percent in Friday's session to $93.87 a barrel, its highest since Sept. 21. It gained 7 percent through last year. The U.S. fiscal deal aside, oil found support from robust data out of China pointing to a recovery in the world's second-largest economy and No. 2 oil consumer. China's official manufacturing purchasing managers' index held steady in December at 50.6, according to data issued on Monday -- adding to evidence that its economy was picking up in the last three months of 2012 after slowing for seven straight quarters. Tensions in the Middle East -- which produces the bulk of the world's oil -- helped crude prices as well. Fourth largest oil exporter Iran was carrying out naval drills in the Strait of Hormuz, a waterway Tehran has threatened to block if it comes under military attack over its disputed nuclear program. Some 40 percent of the world's sea-borne oil exports pass the strait.
METALS DOMINATE COMMODITY GAINS Copper, like oil, also hit 11-week highs, rising more than 3 percent to above $8,205 a tonne in London and nearly $3.74 a lb in New York for the biggest daily rise since September. Last year, copper finished up 4 percent. Metals dominated gains on the 19-commodity Thomson Reuters-Jefferies CRB index, with four of the top five markets for the day being aluminium, nickel, silver and copper. Aluminum and lead -- another industrial metal used for battery making -- rose more than 4 percent each in their biggest leap since September. Part of those gains were driven by renewed confidence in the economy in China, the world's largest buyer of metals. "The other big thing for the metals market is a strong rebound in China that could be underway; the data is pointing to that. Sentiment is certainly risk-on," said Robin Bhar, a metals analyst in London for Societe Generale. In precious metals, gold rose about 1 percent to hover at 2-week highs of around $1,690 an ounce in both the spot and U.S. futures markets. In India, the No. 1 market for bullion, gold futures notched their highest gains in two weeks after the finance minister hinted at making imports more expensive, triggering speculative buying from physical traders. India's central bank has also asked that volume and value restrictions be placed on gold imports by banks and agencies such as MMTC to help rein in a current account gap, which touched an all-time high in the July-September quarter.
Prices at 12:11 p.m. EST (1711 GMT)
LAST NET PCT YTD CHG CHG CHG US crude 92.85 1.03 1.1% -6.1% Brent crude 112.10 0.99 0.9% 4.4% Natural gas 3.203 -0.148 -4.4% 7.2%US gold 1691.10 15.30 0.9% 7.9% Gold 1690.35 15.81 0.9% 8.1% US Copper 373.50 8.25 2.3% 8.7% LME Copper 8200.00 269.00 3.4% 7.9% Dollar 79.778 0.013 0.0% -0.5%US corn 693.00 -5.25 -0.8% 7.2% US soybeans 1410.00 -8.75 -0.6% 17.6% US wheat 761.75 -16.25 -2.1% 16.7%US Coffee 148.55 4.75 3.3% -34.9% US Cocoa 2254.00 18.00 0.8% 6.9% US Sugar 19.71 0.20 1.0% -15.2%US silver 31.075 0.848 2.8% 11.3% US platinum 1563.20 24.50 1.6% 11.3% US palladium 709.30 5.95 0.9% 8.1%