The Canadian Press

Bank of Nova Scotia’s commodity price index was up 20.7% in December from its cyclical bottom in April, the result of a widespread rebound in the prices of most natural resources.

The index gained 2.9% between November and December, ending 2009 on a strong note due to increased interest in commodities as an investment.

Patricia Mohr, a commodity market specialist at Scotiabank, said the search for higher returns spurred a US$60-billion inflow into commodity-related investments in 2009. This inflow boosted global commodity assets under management to $235 billion by late 2009, compared to only $6 billion to $10 billion in 2000.

Base metals benefited most dramatically from investor interest due to burgeoning demand from China as that country’s economy continues to heat up.

Metals and minerals led the commodity index in December due to “broad-based gains” in prices for the base metals — including copper, aluminum and zinc — and the strength of gold, which hit a record high of US$1,225.56 in intra-day trading on Dec. 4. Lead was the strongest performer of all 32 commodities covered in Scotiabank’s index in 2009, due in large part to demand for batteries used in electric vehicles.

Mohr predicted base metal prices will be more volatile in 2010 before climbing in 2011.

Scotiabank said potash prices fell again in December to US$460 per tonne before tumbling even further in January, but finally appear to have hit bottom.

“Fertilizer sales started to pick up in the United States in December, after under-application by farmers for most of 2009,” Mohr wrote, adding that stronger crop prices should encourage potash sales this year.

Mohr also predicted a more than 30% increase in prices for premium-grade hard coking coal from Western Canada when annual contract negotiations are concluded with Asia.

The oil and gas index saw a 2.8% month-over-month advance in December due to stronger natural gas export prices and a jump in propane prices, which more than offset slightly lower oil prices. The forest products index also gained 2.8% last month due to a rebound in U.S. building material prices and increased demand for newsprint.

The agricultural index rose 3.5% due to an increase in Atlantic lobster prices, some improvement in livestock prices and slight gains in wheat and canola, Mohr said.