Commodity markets hit their highest levels for months on Thursday after the US Federal Reserve gave nascent investor confidence a fillip by unveiling plans to buy more government bonds and mortgage debt.

The Fed surprised investors on Wednesday by announcing it would buy $300 billion worth of long-dated US Treasuries, the first aggressive buying since the early 1960s, as part of a move to inject an additional $1 trillion into the economy by also purchasing more US mortgage and agency debt.

This sent the dollar lower and helped lift commodities, which have seen some signs of strength in recent days and sent the Reuters-Jefferies CRB index, a global commodities benchmark, to a five-week high.

Oil jumped more than 6 percent to above $51 a barrel, its highest since early December, while copper rallied over 5 percent to its highest in more than four months as investors dipped their toes in riskier markets on hopes that the global slowdown may soon reach bottom.

“Commodities take a lot of cue from equities and this move (from the Fed) could be a reassurance that equity markets, which have been rallying in the last couple of weeks, could continue to rise,” said Michael Lewis, global head of commodities research at Deutsche Bank.

“If we get more of these concerted easing steps they will obviously help,” he said. European shares rose around 2 percent by midday while the euro was up around 1 percent versus the US dollar.

A fall in the greenback makes dollar denominated assets such as commodities cheaper for holders of other currencies.

US crude for April was up $3.84 a barrel at $51.98 by 1310 GMT, having earlier traded as high as $52.04. London Brent for May delivery rose $3.61 to $51.27.

“We have for the time being a return to risk appetite in the oil market and it’s based on the Fed’s announcement yesterday,” said analyst Mike Wittner of Societe Generale. “That’s having a positive impact on sentiment.”    

Spot gold rose to a peak of $951.90 an ounce, its highest since March 2, and was quoted at $947.20/949.20 an ounce from $940.00 late in New York on Wednesday.

Richcomm Global Services said in a research note there are concerns the Fed move may prompt other central banks to follow suit, creating a domino effect of weakening currencies and sending investors to safer investments such as gold.

The move and improvement in the sentiment pushed all metals higher. London Metal Exchange copper rose to $4,020 a tonne, above $4,000 for the first time since Nov. 10. Aluminium jumped 4.5 percent, while nickel rallied 3.7 percent.

Copper is up 25 percent this year in London and 30 percent on the Shanghai Futures Exchange, but some analysts think the initial euphoria from the Fed move could peter out soon with any expected benefit unlikely to be felt immediately.

“There may be positive economic benefits but I think it will take time for those to emerge. For the time being, real economic data out of the U.S. has remained extremely weak and an obstacle to sustained recovery in base metals prices,” said said David Moore, commodities strategist at Commonwealth Bank of Australia.

Demand growth in China, the world’s largest copper consumer, is also sluggish with estimates of an increase of between 3-8 percent this year, say analysts.

Sugar, cocoa and coffee futures all rose, swept up in a broad-based advance in commodity markets triggered by the Fed measures.-Reuters