Commodities Rallied Across Board in 2010 – WSJ.com

Commodities Jan 03, 2011 No Comments

In a measure of how powerful the raw-materials rally has been, copper and gold are at all-time highs, while cotton and sugar are pricier than in mid-2008. And oil, while down from its peak of $145 a barrel from July 2008, is still pricier than in September 2007, a year before Lehman Brothers collapsed.

The broad commodities rally has been propelled largely by demand from China and other rapidly growing nations, which have also bounced back quickly from the economic slowdown and are straining the ability of the world’s drillers, miners and farmers to meet their needs.

But commodities also are drawing record-setting interest from hedge funds, pension funds and other institutional investors eager to profit from the run-up. Such investors were expected to have poured $60 billion into the commodities markets in 2010, the second largest inflow after $76 billion in 2009, according to Barclays Capital.

The flood of cash is raising concerns about potential consequences if investor sentiment turns away from commodities, perhaps if the Federal Reserve signals an intent to raise interest rates after years of extraordinarily loose monetary policy.

“When will this money leave the commodity space? That’s the billion-dollar question, and nobody knows exactly,” Bob Takai, general manager of financial services at Sumitomo Corp., said in an email. “But everyone knows it will be very ugly.”

For now, however, demand is strong and investors eager, and the results were clearly visible across the commodity markets in 2010.

via Commodities Rallied Across Board in 2010 – WSJ.com.

Rod Sherkin

Rod is a former senior executive, responsible for Purchasing, for both Pillsbury and Ball Packaging back in the 80’s and 90’s. Since then, he has continued to work in the Purchasing field as both a consultant and founder of the website Propurchaser.com.