"The index benefited from contributions from all commodity groups, led by metals and minerals' largest monthly advance in 18 years, " says Earl Sweet, assistant chief economist at BMO Financial Group. "This was followed by oil & gas' first gain in 2006, while increases in agriculture and forest products were comparatively modest. "
BMO is now forecasting the overall index will climb seven per cent this year from record 2005 levels, thanks to continued strength in energy and metals prices.
"Nonetheless, this gain would still represent a significant loss of momentum in the index, following average growth rates of 21 per cent in the previous three years," Mr. Sweet says.
Oil and gas prices jumped 7.4 per cent in April, reversing three months of declines.
"A powerful rally in the price of crude oil contributed the most to the monthly rise, " said Mr. Sweet. "Geopolitics drove oil prices upwards, as Iran flaunted its nuclear research progress. This raised concerns that potential sanctions imposed by the United Nations could eventually reduce the flow of oil from Iran in an already supply-constrained market. "
BMO has hiked its oil forecast, predicting an average for West Texas Intermediate of US$67/barrel in 2006 and US$59/barrel next year.
Metals and minerals soared 13.4 per cent increase, with large gains in both precious and industrial metals.
"Precious metals were stoked by geopolitical risk factors, inflation concerns and US dollar weakness. Base metals were lifted by accelerating demand, supply-side concerns such as strikes, and investment fund buying, " said Mr. Sweet.
