Reply #12: Commodities Rise to Record on Sugar, Copper Gains

[RawMaterials]

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.

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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.

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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.''




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