Gold and corn prices hit record highs on Tuesday and crude oil hit new peaks as euro zone woes sparked inflation fears that drove investors into commodities.
Most commodities erased earlier losses stemming from China hiking interest rates, which could slow imports by the world's No. 1 consumer of raw materials. Beijing raised benchmark lending rates by a quarter per cent in its fourth rate hike since October.
"The market doesn't seem that bothered about Chinese interests rates any more," said David Morrison, strategist at London brokerage GFT.
Spot gold, which reflects trading in bullion, jumped to an all-time high above $1,450 an ounce, as a downgrade in Portugal's credit drew attention back to sovereign debt woes. Spot silver rode on the coattails of the gold rally to a 31-year high above $39 an ounce. Silver futures in New York also approach $40.
"Big money continues to believe gold will go higher," said Axel Merk, portfolio manager at Merk Mutual Funds, which has some $600-million under management.
U.S. corn futures extended their biggest rally in six months as traders feared stocks of the grain would run out unless ranchers or ethanol makers cut back demand.
"The market is very overbought," said U.S. Commodities analyst Don Roose. "But we're still not sure if we're rationing demand. We're seeing fund buying until you show some sign of that."
Corn's benchmark front-month contract on the Chicago Board of Trade set a new high of $7.70-3/4 per bushel after matching on Monday the record of $7.65 set in June 2008.
The euro's recovery against the dollar also provided a broad lift to commodities, as the weakening of the greenback made dollar-priced assets such as oil and copper more affordable to holders of the euro and other currencies.
The euro has strengthened since late March on expectations that the European Central Bank will embark on a rate hike.
The 19-commodity Reuters-Jefferies CRB index, a global benchmark for the asset class, was up 0.3 per cent after slipping about half per cent earlier.
MIDEAST UNREST RALLIES BRENT
Unrest in the Middle East and Africa continue to propel crude oil prices higher, with Brent crude rising almost 1 per cent to a new 2-1/2 year high above $122 a barrel.
U.S. crude settled slightly lower, closing down 0.1 per cent at $108.34 a barrel, pressured by huge stocks in the Cushing, Oklahoma, delivery hub.
Brent rallied on news that Nigeria - an OPEC member - was postponing elections, adding to concerns that Libya's 1.3 million barrels per day of crude exports would remain shut due to an escalation of the war in that country.
"The geopolitical problems ... (and) Nigeria's election delay ... (are) all hitting crude supply," said Andrew Lebow, broker at MF Global in New York.