Anglo American share price extends rally to 60 percent in 10 days

Anglo American Plc (LON:AAL) shares continued their impressive rally today, surging another 10 percent as short covering and upbeat commodities amid the depressed dollar buoyed demand.

Anglo’s share price had added 9.17 percent to 358.55p as of 12:52 GMT, following a 20 percent gain yesterday, which is the highest daily gain for Anglo on record. Over the past eight sessions the stock has climbed nearly 60 percent. Earlier in January, the stock dropped to an all-time low and Anglo became a leading candidate for relegation out of the FTSE 100 in the coming index review in March.
With growing worries over the miner investors increasingly bet against the stock, via so-called shorting, in which they borrow shares with the intention of buying them to cover the position later on, when the stock is cheaper, resulting in a net gain.

However, as Anglo’s fortunes appear to have reversed, short sellers may have been forced to quickly cover positions in order to cut losses, reinforcing the stock’s rally.
“Stories that Anglo American might fall out of the FTSE 100 index may have encouraged hedge funds and other investors to short the stock,” analysts at SP Angel argued. “The recovery in gold and other commodity prices yesterday prompted a rally causing a likely rapid unwinding of short position and a rush to contain losses by short sellers.”
Chinese funds and short sellers in particular, could be rushing to close positions ahead of the New Year break, the adviser pointed out.
Commodities have enjoyed resurgent interest in the past week, as the dollar tumbled on increasing expectations that the Fed will likely delay the forthcoming rate hike.
US payrolls data later today, expected to reveal a significant slowdown in the pace of job creation, is likely to cement expectations for a more dovish Fed position next month.
The US Dollar Index has dropped more than three percent in the past 10 sessions, which in turn makes dollar-denominated commodities, such as metals, cheaper to holders of other currencies. All the base metals, platinum-group precious metals and energy commodities were nearing double-digit gains for the past two weeks today.
Other mining companies also clocked in sizable gains over the past two sessions. BHP Billiton is up about 10 percent, Rio Tinto has added seven percent, while beleaguered Swiss firm Glencore has climbed nearly 20 percent.
As of 13:14 GMT, Friday, 05 February, Anglo American plc share price is 358.50p.