Commodities markets summary

A summary of trading in key commodities markets overseas:

ENERGY

Oil has had a volatile, fluctuating between gains and losses, following a sharp climb in the prior session, as investors assess the potential for talks on a production cut.

Both Brent and WTI fell close to two per cent.

At 0747 Friday (AEDT) Brent, the global benchmark, was down 1.80 per cent, or 63 US cents, at $US34.41 a barrel, after hitting a high of $US35.84 earlier in the day.

WTI crude was off 1.92 per cent, or 62 US cents, at $US31.66, after reaching a high of $US33.60.

PRECIOUS METALS

Gold has risen for a second day, hitting three-month highs as the US dollar continued to ease amid mounting doubts that the US Federal Reserve will raise interest rates in 2016 due to global economic and financial headwinds.

Analysts have said dovish comments from New York Fed President William Dudley on Wednesday and recent weak US economic data have cast more doubt on the likelihood of a swift pace of Fed rate increases in 2016.

"The market is fetishising bad news and convincing itself that the Fed will never be able to hike again," director of base and precious metals trading for BMO Capital Markets in New York.

Higher US interest rates make non-yielding gold a less attractive asset.

Spot gold was up more than one per cent at $US1,155 an ounce at 2.20 pm EST (0620 Friday AEDT), after touching $US1,156.60 earlier in the session, its highest since October 29.

US gold futures for April delivery settled up 1.4 per cent at $US1,157.5 an ounce.

Spot silver was up 1.09 per cent at $US14.89 after hitting a three-month peak of $US14.96 an ounce.

Spot platinum touched $US905.61, its highest since November 11, while palladium was up 1.05 per cent at $US517.75.52 after hitting a one-month peak of $US515.54 on Wednesday.

BASE METALS

Zinc has climbed to its highest in more than three months on concerns about potential shortages, while a slide in the US dollar on worries about the US economy boosted copper and the wider industrial metals market.

Metals were buoyant as investors scrambled to close out bearish positions before the Lunar New Year holiday in China.

The closure of major zinc mines in late 2015 and the filing for Chapter 11 bankruptcy by US producer Horsehead this week highlighted concern over tightening supply.

London Metal Exchange three-month benchmark zinc surged to a peak of $US1,728 a tonne, the highest since October 29, before paring gains to close at $US1,715, a rise of 1.1 per cent.

One trader, however, said the market was getting ahead of itself because shortages would not affect the market until later in 2016.

"It's a good bounce but fundamentally unwarranted at this stage."

LME sister metal lead gained 0.5 per cent to finish at $US1,803 a tonne after touching a peak of $US1,829, the strongest since October 15.

But rallies in base metals could peter out, said Caroline Bain, senior commodities economist at Capital Economics.

"Even though we're positive on the outlook for the second half, this could turn out to be a false dawn. The fundamentals aren't really in place yet, it's quite sentiment-driven and there's uncertainty about US rates."

LME copper ended 1.1 per cent firmer at $US4,687 a tonne, building on the previous session's 1.9 per cent gain. The contract touched an intra-day high of $US4,720, its highest since January 4.

Aluminium rose 0.6 per cent to $US1,534.50 a tonne, tin climbed 0.8 per cent to $US15,000 while nickel added 0.2 per cent to $US8,535.

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