Commodities Surge -- But Look at The Reasons

What's up with commodities? They're roaring again today, with strength in grains, energy, metals. There are some broad issues: it's an inflation hedge, many commodities price in dollars. Also, remember that most of these markets are a tiny fraction of the stock and bond markets, so it's easier to move them around.

Let's look at a few of these commodities and why they are moving.

Coal. Tight supply issues and strong demand. Problems in Australia and South Africa.

Iron ore. Contract pricing will be up 65 percent for 2008 (!). This will help not just iron ore stocks, but also steel makers like Nucor and Steel Dynamics who make steel from scrap and arc furnaces. Steel makers also look poised to raise prices.

Oil. Prints at $99.65 about 1:40pm ET -- after striking an intraday record of $100.10 on the Nymex. Plenty of talk about a slowdown on U.S. growth issues, but the bottom line is that it is very rare to actually have demand contraction in energy.

Gold. New high. Production issues in South Africa, where electricity is a problem; also considered a safe haven.

Platinum. New high, backwardation (front month contract price is higher than months farther out) thanks to high demand for catalytic converters.

Copper: 4 month high.

No surprise that energy and material stocks are the leaders, many up 3-5 percent.

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