Gold hit record highs on Wednesday on safe-haven buying linked to the European debt crisis and the dollar weakened by hints of more economic stimulus from the Federal Reserve, while supply concerns drove most other commodities higher.
The 19-commodity Reuters-Jefferies CRB index settled up almost 1.5%after US government data showing strong fuel demand boosted oil prices, and corn and wheat extended gains posted on Tuesday from lower stockpile estimates.
White sugar surged to an all-time peak for a second straight session in London, reacting to the weaker dollar, expectations for more stimulus programs in the United States and a smaller cane crop in top sugar producer Brazil.
The dollar tumbled against most major currencies after Federal Reserve Chairman Ben Bernanke said the central bank could resort to more monetary stimulus if the US economy weakens further.
The Fed last month ended its second round of quantitative easing, a USD 600 billion bond-buying program the market dubbed QE2, prompting questions on whether there would be more stimulus.
"We have fear and contagion risks in Europe, and we are getting a rally of risk assets on the back of Bernanke alluding to the Fed trying to stimulate the economy, what people refer to as QE3," said Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital, a fund in Los Angeles, California, that has more than USD 12 billion under management.
Gold surged to a record above USD 1,580 an ounce as the deepening European debt crisis and the possibility of more Fed stimulus built bullion's longest winning streak in five years.
The spot price of gold , which reflects trading in bullion, stood at just above $1,581 an ounce in late afternoon trading in New York, up from the previous session's close above USD 1,569. It had surged to an all-time peak of nearly $1,590 an ounce earlier -- its highest gain in two months.
It was the eighth consecutive day of gains for gold, something not seen since mid-October 2006, when it rose for nine days in a row. The precious metal has gained around 12% so far this year and has more than doubled in price in the last four years.
"The worst thing for gold would be to have the economy doing well enough that the Federal Reserve starting to normalize monetary policy, or conditions in the European community beginning to settle down. As we can see, neither is happening," said Mark Luschini, chief investment strategist at Janney Montgomery Scott, which manages some USD 54 billion.
US crude oil settled up 0.6% at just above USD 98 an ounce after racing past USD 99 earlier, helped by a report from the Energy Information Administration that showed crude stockpiles falling more than the market expected last week.
Corn futures in Chicago hit a four-week high above USD 7.30 per bushel on the combination of the weak dollar and hotter-than-normal weather forecasts that raised concerns over possible crop yield damage.
Wheat also hit its highest mark since mid-June as short-covering topped up its corn-fueled gains, and soybeans rose more than 1%.
White sugar futures closed up 2% in London at just above USD 876 a tonne after racing past USD 890 during the session - a record high for a second day in a row.
White sugar prices have rallied some 40% over the past two months on bets that Brazil will cut cane production sharply this year. Wednesday's run-up was, however, fueled more by Fed chairman Bernanke's hints of another round of stimulus that could inflate asset prices, including that of commodities.
"I have three words for you - QE3," said Sterling Smith, senior analyst for brokerage Country Hedging Inc. "It turned sentiment around. This is a macro rally."
Prices at 4:43 p.m. EDT (2043 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US crude 97.78 0.35 0.4% 7.0%
Brent crude 118.58 0.83 0.7% 25.2%
Natural gas 4.403 0.070 1.6% 0.0%
US gold 1585.50 23.20 1.5% 11.5%
Gold 1580.49 15.24 1.0% 11.3%
US Copper 440.35 1.20 0.3% -1.0%
LME Copper 9649.85 -0.15 0.0% 0.5%
Dollar 75.186 -0.624 -0.8% -4.9%
CRB 349.170 4.910 1.4% 4.9%
US corn 726.75 29.75 4.3% 15.5%
US soybeans 1387.00 20.50 1.5% -0.5%
US wheat 702.00 39.25 5.9% -11.6%
US Coffee 263.95 6.10 2.4% 9.8%
US Cocoa 3170.00 119.00 3.9% 4.4%
US Sugar 30.24 -0.25 -0.8% -5.9%
US silver 38.151 2.517 7.1% 23.3%
US platinum 1767.00 30.70 1.8% -0.6%
US palladium 784.00 16.55 2.2% -2.4%
