November 9, 2010 / 7:42 AM / 9 years ago

Gold hits record in rush to commodities

LONDON (Reuters) - Gold and tin struck record highs on Tuesday and other commodities stormed to their strongest levels in years, supported by expectations of dollar weakness and hopes of demand for raw materials due to U.S. stimulus measures.

Sugar hit a 30-year peak and coffee a 13-year high. Copper, which neared a record, oil, platinum and corn all hit their highest levels since 2008.

“I think people (funds) are reallocating some money to commodities,” said Romain Lathiere, fund manager with Diapason Commodities Management. “Everybody wants sugar, coffee, base metals, gold and silver as well,” he added.

Gold hit a session peak of $1,422.30 an ounce, reaching a record high for a fourth straight session on worries about inflation and euro zone sovereign debt.

Bullion has rallied since the U.S. Federal Reserve announced last Wednesday its plans to purchase $600 billion worth of government bonds.

Stoking market caution, three top U.S. Federal Reserve officials on Monday voiced concerns about the move.

Prospects of inflation contributed to commodities’ gains.

“We don’t see any chance that the United States, euro zone nations, or Japan would pull out of easy monetary policies any time soon, so inflation worries will continue to be a reason for speculative trades.”

“Anticipation of inflation, in addition to existing inflation in some countries, has fueled a sharp rally across the board in commodities,” said Hou Xinqiang, an analyst at Jinrui Futures.

Spot silver — nearing $29 an ounce — hit a 30-year high, palladium touched a 9-year peak of $730 an ounce and platinum peaked at $1,790.

Three-month tin prices on the London Metal Exchange (LME) rallied to a record high of $27,500 a tonne.

LME copper hit a session high of $8,875 a tonne, closing in on an all-time peak of $8,940 hit in July 2008.

Oil neared $88 a barrel after the International Energy Agency released its long-term outlook, saying oil prices might exceed $100 a barrel in 2015 and $200 in 2035. <O/R>

Capping oil’s gains, however, forecasts indicated U.S. crude stockpiles rose for the fifth time in six weeks and German September industrial output unexpectedly fell. <EIA/S>

Losses in the dollar attracted non-U.S. investors to commodities, which have shown a marked negative correlation with the U.S. currency. The euro rose but has fallen from a 9-1/2 month high versus the dollar set last week. <USD/>

“Yes the market is worried about the euro zone, but they are more worried about the Fed, and about copper supply,” a dealer in Hong Kong said. “Despite the breakdown in the past few days, the short dollar-long commodity trade looks set to continue to be a money spinner.”

SOFTS HIT HIGHS

Raw sugar futures on ICE set a 30-year high on Tuesday while arabica coffee climbed to a 13-year peak. The sugar market has surged in recent months, with prices more than doubling since May, as expectations for a rise in output failed to materialize due to bad weather, sparking concern over low stocks.

March raw sugar futures on ICE rose to a peak of 32.68 cents a lb, a 30-year high for the benchmark front month, before easing back to 32.63 cents.

Arabica coffee futures on ICE rose to a 13-year high on the front month with December up 4.2 cents or 2.0 percent at $2.1230 per lb after peaking at $2.1440.

Supporting prices were tight supplies of high quality washed arabicas following several years of below-par crops in Colombia.

Corn prices on the Chicago Board of Trade rose to the highest level since August 2008 with a key report to be issued on Tuesday by the U.S. Department of Agriculture expected to signal tightening supplies. December corn rose 1.8 percent to $5.95-3/4 a bushel after peaking at $5.96-1/4.

Additional reporting by Nigel Hunt, Rujun Shen, Naveen Thukral and Nicholas Trevethan; Editing by Anthony Barker

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