TORONTO - A "modest" rise in commodity prices this August is yet another a signal that the global economy is beginning to revive from the ravages of the recession, according to Scotiabank's (TSX:BNS) commodity price index.

The bank said Tuesday its gauge of price trends in 32 of Canada's major exports was up 3.5 per cent in August, after falling in July, with base metal prices returning to profitable levels as demand picked up from China and India.

Scotiabank noted that its index hit a bottom that was higher than normal, compared with previous economic downturns, citing "an unusually rapid recovery in industrial metal prices."

"Base metal prices have already returned to profitable 'mid-cycle' levels, a development normally taking several years following the end of a global downturn and a testimony to the resiliency and growing importance of China and 'emerging' Asia, including India, in the world economy," Patricia Mohr, vice-president of economics at Scotiabank, said in a release.

The index was up 6.7 per cent from a cyclical low in April.

The report said Chinese imports of copper, zinc and nickel hit record levels in the first half of 2009, despite the depth of the global recession as China stockpiled resources and overall demand was high. Gold, which surged to a near-term price high of US$1,024 an ounce on Sept. 18, is getting support from U.S. dollar weakness and calls for development of a new reserve currency.

"Interest by institutional investors, hedge funds and sovereign wealth funds in commodities as an asset class has also returned significantly since last spring - driven by the China story and US dollar weakness," Mohr said.

"After falling out of favour in late 2008, passive, long-only commodity index investment has become popular once again, with long-term institutional investors and sovereign wealth funds choosing these products to provide broad-based exposure to global commodity markets; assets under management in commodity index products increased by US$23 billion to $86 billion in the second quarter of 2009."

Metals and minerals were the leading gainers on the index, surging 8.1 per cent month over month. Copper prices have more than doubled from a low of $1.26 per pound on the LME on Dec. 24, 2008 to a peak of $2.94 in August before moving back to $2.67 in late September.

Oil prices jumped from an average of just over $64 per barrel in July to $71 in August but the report said prices remain volatile as U.S. economic indicators suggest a bumpy recovery for that country. Global petroleum demand has "turned the corner," advancing year-over-year in August for the first time since July 2008, Scotiabank said.

Even the beleaguered forestry segment rallied in August, gaining 2.4 per cent month-over-month on the normal late-summer pick-up in U.S. building material prices and stronger pulp prices.

The agricultural index dropped 7.1 per cent as lower wheat, barley, livestock and fish prices more than countered firmer canola prices.