Compared to the vast currency, stock and bond markets, commodities are small potatoes. But that has not deterred investors from plowing money into raw materials and related derivatives to diversify portfolios.
From copper and crude oil to coffee and grains, old fashioned commodities in 2004 have became perhaps the hottest asset class, taxing the sector's ability to accommodate the inflow.
This is a far cry from the 1980s and 1990s when they were overshadowed by overpriced technology stocks.
"As far as the commodity sector goes, the focus is pretty much on energy and metals. But certainly there is going to be interest in alternative investments when the stock market is sluggish like it is, and ways to play these different markets," said David Rinehimer, head of commodities research at Citigroup Global Markets.
The Reuters CRB Index, a basket of 17 commodity futures tracked closely by institutional investors and economists, rose to 285.37 on September 30, its highest level since early 1981.
On the New York Mercantile Exchange last week, oil rose above $50 a barrel for the first time and COMEX copper hit a nine-year high.
These helped lift rival gauges like the Goldman Sachs Commodity Index (GSCI), which hit a lifetime high.
John Kemp, economist with Sempra Metals in London, likened institutions with a taste for commodities to "very large fish swimming in our comparatively small pond," adding that the market has already become distorted.
Because commodities tend to correlate negatively with other asset classes, mutual funds, pension funds and hedge funds increasingly see them as a smart way to balance portfolios.
If every portfolio manager, who, for example might have a weighting of 60 percent equities and 40 percent bonds, allocated 1 or 2 percent to commodities, it would have a dramatic impact on the sector.
If they do, their choices are not perfect, limited to trading the various indexes, risky futures or more often the shares of energy, mining and food companies.
Since the Wall Street bubble burst in 2000, China's booming economy has become a locomotive of world growth. It was behind the rush on primary goods this year, buying everything from base metals and steel to cotton and wheat to feed construction in the cities and rising demand for consumer goods in the world's most populous nation.
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