March 1 (Bloomberg) -- Metals, crops and fuel beat stocks, bonds and the dollar for a third straight month, the longest stretch since June 2008, as inflation lifted cotton and cocoa and investors speculated violence in the Middle East and northern Africa will restrain energy supplies.
The S&P GSCI Total Return Index of 24 commodities gained 3.8 percent in February and rose for a sixth consecutive month, the longest streak since 2004, data compiled by Bloomberg show. [...]
Faster global growth pushed up raw-material prices since September and gains accelerated after riots toppled leaders in Egypt and Tunisia and threatened Libya’s Muammar Qaddafi. At the same time, central banks in emerging economies from China to Russia are raising interest rates and boosting reserve requirements at banks to fight inflation, holding back equities.IMHO the previous two paragraphs are just rationalization and do not reflect any real fundamental change.
“These commodity price increases are staggering,” said Kevin Rendino, a money manager at New York-based BlackRock Inc., which oversees $3.45 trillion. “Each commodity is different, but there is a supply issue for oil. There has been real economic demand for these commodities since the economy began recovering.”
[...]The Dollar is quite stronger than when it bottomed a few years ago. Global demand, I can't tell, but I can tell that European and American demand must be quite lower as well.
Cotton advanced 14 percent to a record $1.9123 a pound, leading gains in crop prices. Production in China, the world’s biggest importer, fell 6.3 percent to 5.97 million metric tons last year, the third consecutive drop, data from the National Bureau of Statistics in Beijing show. Futures have risen 32 percent in 2011 through February, the biggest gain to start a year, according to Bloomberg data starting in mid-1959.
“The dominant influence with regard to strength in commodities is equally split by global demand and dollar weakness,” said Liam Dalton, president of Axiom Capital Management Inc. in New York, which oversees $1.4 billion. “In terms of traditional inflation in the U.S., we have a very tough time getting that going right now, whereas in some of the overseas markets like China, India and Brazil, there is potential for inflation because of tremendous organic demand.”
These prices are completely disconnect from reality and if I were not a believer of the sentiment driven markets, I couldn't believe people are thinking about fundamentals in the face of record unemployment in western economies, revolutions in middle east and sovereign defaults in Europe... What's going on in speculators mind? They are high on Bernanke's and Trichet's deadly drug.