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Copper, Gold Jump As Dollar Drops; Silver Hits 30-Yr Peak, But Corn Falls

Posted 10/13/2010 06:30 PM ET

Copper hit 27-month highs and gold returned to record peaks on Wednesday, propelling a widely watched commodity index to a two-year high as the dollar weakened again on expectations that the U.S. Federal Reserve will soon start a new round of monetary easing.

Oil prices rose too, aided by the falling dollar and higher crude imports by China.

But corn fell as traders took profits after a powerful rally lifted the market by about 20% over the last four sessions.

The 19-commodity Reuters-Jefferies CRB index rose more than half a percent to above 300 points for the first time since Oct. 14, 2008. At that time, markets were coming off their peaks before the worst recession in decades.

The CRB has risen 5% over the last month as the dollar tumbled about 6% on concern the U.S. Federal Reserve would embark on a new round of government debt purchases to boost the economy. Many believe the program, called quantitative easing or "QE2" in financial markets, could fuel inflation.

Some analysts view the CRB's upward trajectory as a sign commodities are headed for a new "supercycle" or multiyear rally similar to the boom that ended in 2008. But others predict a sharp sell-off if inflation does not kick in as expected.

"The CRB is looking all vertical now and so are many commodities and this is great for market bulls, but the truth is we are close to exhaustion on many of these rallies," said Shawn Hackett, president at Hackett Financial Advisors, a money manager in soft commodities in Boynton Beach, Fla.

"Once the excitement over the QE ends, it's going to be hard to sustain all these, without the right supply-demand fundamentals in place."

Fed watchers said near-term easing measures looked more likely this week after they read minutes of the Sept. 21 policy meeting, which the Fed released on Tuesday.

U.S. copper futures' most-active contract, December, rose 3.10 cents to settle at $3.8205 per pound, the highest close for a benchmark third-month position since July 7, 2008.

"I would say this has almost everything to do with the U.S. dollar," said Jeff Pritchard, a copper broker and analyst at Altavest Worldwide Trading in Mission Viejo, Calif..

London's three-month copper contract rallied to $8,430 a metric ton, its loftiest price since July 2008, before ending up $12 at $8,362.

U.S. gold futures' current benchmark contract, December, settled up $23.80, or 2%, at $1,370.50 an ounce after surging to a record high near $1,375.

Silver, often known as the poor man's gold, hit a 30-year peak to approach $24 an ounce.



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