Commodity markets managed only a brief rally on Monday, even after China’s government announced a $586bn economic stimulus package.

Traders said that the size of the package, equal to 16 per cent of China’s gross domestic product, underlined growing nervousness in Beijing at the country’s economic slowdown.

“China’s fiscal stimulus package is further relief for world markets and supports our view that policy makers will do whatever it takes to restart global growth,” said John Meyer, mining analyst at Fairfax.

Among the base metals, copper rose 3.5 per cent to $3,885 a tonne after touching a high of $4,171.75 while nickel added 2.7 per cent at $11,400 a tonne after hitting an early peak of $12,450.

Analysts at Barclays Capital said that China’s “grandiose infrastructure plans” would provide a boost for metals consumption but cautioned that the benefit would not impact demand until the second half of next year.

Aluminium strengthened 0.5 per cent at $1,995 a tonne while zinc rose 0.5 per cent to $1,110 a tonne, but lead fell 1.8 per cent to $1,350 a tonne and tin dropped 1 per cent to $14,350 a tonne.

Jerry Lou of Morgan Stanley said Beijing had done the right thing in allocating investment to strategic areas and that the package should help avert a “hard landing” for the economy in 2009.

Some of the rally was also driven by “short-covering” as the news from China prompted hedge funds to close earlier bets that metals prices would weaken as the global economic outlook deteriorated further.

In energy markets, Nymex December West Texas Intermediate rose 13 cents to $62.00 a barrel after reaching a session high of $66.39 while ICE December Brent rose 35 cents to $57.70, supported by reports that Saudi Arabia was to cut supplies to Asian refiners by 5 per cent in December.

The latest data on speculative positioning from the Commodity Futures Trading Commission showed hedge funds had extended their bets on oil prices weakening. The net short position on Nymex rose 25.4 per cent to 10,543 contracts in the week ending November 4 when WTI hit $70.53.

The net short position for crude oil has risen to its highest level since February 2007, but Michael Lewis, commodity strategist at Deutsche Bank, said: “Positioning is still modest compared with the aggressive short positions accumulated in the 2001-2002 economic downturn.”

The Dubai Mercantile Exchange has reached an agreement with CME Group to allow trading of the DME Oman crude oil futures contract on CME’s Globex platform from the first quarter of 2009.

Gold rose 1.3 per cent to $745.50 a troy ounce.

RBC Capital Markets has cut its 2009 average gold price forecast from $935 to $850 and from $965 to $875 for 2010.

Stephen Walker of RBC said institutional money managers had been forced to sell gold to raise cash to meet redemptions, putting downward pressure on bullion prices.

However, RBC also said the recent extraordinary fiscal and monetary initiatives by governments worldwide meant there was likelihood that gold and silver prices would see renewed strength.

RBC has cut its 2009 and 2010 average silver price forecast to $11 a troy ounce from $17 and $17.50 respectively.