ST. LOUIS: From gold to grains to oil, commodities finished 2010 at or close to their highest levels in years. Gold closed Friday at $1,421.40 an ounce, up roughly 31 percent for the year after an almost uninterrupted climb since January. Grains and soybeans capped off a rally that started this summer, and oil prices ended the year at levels many analysts considered unachievable just six months ago. The jump in commodity prices has been driven by China's seemingly insatiable demand for raw materials and speculators betting that they could profitably ride the momentum higher. Analysts expect the price increases, and volatility, will continue well in 2011. “People are looking to get out of the dollar, and stocks have run up so much that commodities are looking like a good alternative,” said Spencer Patton, founder and chief investment officer for hedge fund Steel Vine Investments LLC. Gold was the clear standout in 2010. It traditionally has been viewed as a classic shelter investment, often used as a hedge against inflation. That kept it idling for much of the decade before the global financial crisis emerged in 2008. Then, as central banks started taking dramatic actions to stimulate their economies, gold starting moving higher as interest rates dropped to record lows and some currencies fell in value. That led some investors to predict higher inflation is inevitable. Other precious metals, like silver, also moved higher. “Gold is much more of a universal hedge, and that's why there is more of a dramatic price movement,” says Edward Meir, senior commodities analyst at MF Global in New York. Gold should continue to rise well into the second half of 2011, said Rohit Savand, senior commodity analyst with CPM Group in New York. Political instability – such as military tensions on the Korean peninsula – coupled with further stimulus plans and bailouts in Europe mean gold's safe-haven status will keep it in high demand. Industrial metals, used to make everything from computer parts to automobile engines, also gained as global consumption and manufacturing started to recover. Copper surged more than 40 percent, rising from just over $3.00 a pound to close the year at $4.4470. Meanwhile, 2010 marked one of the most profitable years ever for farmers in the US Midwest. The USDA predicts that net farm income for 2010 will be $81.6 billion, up 31 percent from 2009 and about 26 percent higher than the annual average over the past decade.
