Reuters Commodity Index at 25-year High

by: Gary Dorsch

The Reuters Commodity index closed at its highest level in 25 years, after hedge fund managers placed their bets on a continuation of the "Commodities Super-Cycle." Base metals, crude oil, gold, and silver, led the advance. China's economic growth rose at a stunning 9.8% rate in the fourth quarter, competing with rampant demand for basic resources from big importers like India, Japan, South Korea, and the United States.

China´s economy will probably expand at more than four times the pace of Europe and Japan in 2006, said Chinese Premier Wen Jiabao. Soaring commodity prices does not signal higher inflation, said G-10 chief Jean Trichet on Monday: "We think that the credibility of the central banks is very important and has proven to be effective as regards inflation expectations. The market has faith in central banks' ability to keep inflationary pressures under control." (Of course, nothing could be farther from the truth, and that is very good news for gold and commodity bulls!)

Reuters Commodity Index-Two Month Chart

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