Commodities Rise to Record on Sugar, Copper Gains (Update2) Jan. 4 (Bloomberg) -- Commodity prices extended their four- year rally by rising to a record today, led by gains in copper, sugar and gold, amid concerns about supplies and the pace of inflation.
The Reuters Jefferies CRB Index of 19 commodities rose 2.12, or 0.6 percent, to 338.49, after earlier reaching a record 338.78. The index has jumped 21 percent in the past year as demand for raw materials such as fuels and metals climbed, boosted by economic growth in China and the U.S.
Sugar was the biggest gainer today, jumping 4.9 percent to the highest price since 1995, after Brazil said its sugar-cane crop will be smaller than previously expected because of a drought. Copper, up 56 percent in the past year, rose to a record. Gold rallied for an eighth straight session, reaching the highest closing price since 1981.
``People have taken a look and seen how well commodities have done and don't see any reason why fundamentally things should change,'' said Robert Leary, a managing director at AIG Financial Products Corp., which makes markets in 30 commodities for institutional investors.
Money invested in commodity indexes such as Goldman Sachs Commodity Index and Dow Jones AIG Commodity Index is up to about $75 billion, from $60 billion in May, Leary said. ``It's both new and old'' investors from pension funds to money managers, foundations and endowments and individual investors, he said.
Inflation Concern
Some investors are buying commodities as a hedge against ``rampant inflation,'' said Marc Morgan, a copper trader at Triland USA Inc. in New York. ``There is no concrete safe haven, other than the fact that you can go into commodities.''
The dollar's biggest two-day drop against the euro in five years also may have sparked some buying of commodities, analysts said. Gold, which today rose to $535.60 an ounce in New York, is up 25 percent in the past year and reached a 24-year high of $544.50 on Dec. 12.
Gold prices are an indicator of future inflation, said Mike Armbruster, a broker and analyst at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``When gold starts making a big move, commodities across the board move higher as well,'' he said. ``It's the inflation theme driving the market.''
Rally `Overdue'
The rally in commodities is ``well overdue,'' said Luke Dowd, who has traded sugar, cotton, orange juice, the CRB and other commodities for 17 years at Dowd Brokers Inc. in New York. Today's rally was ``pretty clearly across the board,'' Dowd said. ``A lot of people see commodities as a way to diversify funds with besides equities. Equities are kind of stale.''
The price of copper has more than doubled in the past two years as demand, led by China, the world's biggest buyer, exceeded supply from mines and scrap yards.
Copper rose to records in New York, London and Shanghai today as contract workers walked off the job at Chile's state- owned Codelco, the world's biggest producer of the metal used in construction and plumbing.
Thousands of workers in maintenance, service and construction went on strike today after Chile's government, Codelco's owner, refused demands for a bonus because of the surge in copper prices, said Danilo Jorquera, a leader of the protest.
Prices Rise
Copper futures for March delivery climbed 4.9 cents, or 2.4 percent, to $2.0975 a pound on the Comex division of the New York Mercantile Exchange, topping the previous record settlement of $2.069 on Dec. 28. Prices earlier reached $2.11, the highest ever. A futures contract is an obligation to buy or sell a commodity at a set price by a specific date.
Gold futures for February delivery rose $3.10, or 0.6 percent, to $535.60 an ounce on the Comex, the highest closing price since April 1981.
Raw sugar for March delivery on the New York Board of Trade rose 0.69 cent, or 4.9 percent, to 14.87 cents a pound, the highest closing price since Jan. 23, 1995.
``Investors are looking for exposure to commodities on the upside,'' Altavest's Armbruster said. ``People are piling on with expectations for a bullish year in commodities.''
The price of lumber, which isn't part of the CRB index, rose the maximum allowed by the Chicago Mercantile Exchange, reaching an eight-month high, on speculation that unusually mild weather in the middle of the U.S. will boost demand from builders during the normally slow winter months.
``People are anticipating building will be more robust than usual,'' said Brian Leonard, a market broker for Rosenthal Collins Group in Chicago. ``Inventories are usually reduced at year end and some people were forced to chase the market higher.''
Lumber for March delivery rose $10, or 2.7 percent, to $385.80 per 1,000 board feet, the highest closing price for the most-active futures contract since April 7. Prices are up 43 percent since late August.
To contact the reporters on this story: Claudia Carpenter in New York at [email protected]; or Pham-Duy Nguyen in Seattle at [email protected]
