Gold hit record highs in dollar and non-dollar terms on Wednesday, demonstrating its strength irrespective of currency shifts, while copper swept to a 14-month peak with fund buying stoking interest.
The glow of gold failed to warm oil prices, as very high stockpiles clouded sentiment.
Although currency fundamentals were running against dollar-denominated commodities, with the U.S. unit holding steady, investors said monetary and fiscal policy from the U.S. and some other leading nations would keep tangible assets in focus.
"There's a lot of passive investment, long-only money coming in every month, and this is a continuation of the pattern we've seen every month this year," said Lars Steffensen, managing director of Essex-based Ebullio Capital Management.
"Until the Fed credibly comes out and says they are going to start reigning in quantitative easing and tightening the printing of money, these commodities are going to go up because they are tangible," he said.
Gold hit a record high for a second day running, rising more than 1.5 percent to an historic $1,216.75 an ounce, versus $1,196.00 quoted late in New York on Tuesday.
The metal also reached all-time highs in euro and sterling terms, according to Reuters data, indicating independent gold strength. U.S. COMEX gold futures for February delivery shot to a new peak of $1,218.40.
For a graphic on gold's rally in different currencies:
http://graphics.thomsonreuters.com/129/GLD_CURR1209.gif
Even though the dollar's firmer tone makes gold and other commodities priced in the unit less attractive, dealers said a move above $1.51 for euro/dollar had boosted expectations for further dollar weakness. The market was also supported by the prospect of more central bank purchases.
"The view is banks in emerging countries will continue to diversify their foreign reserves and look for the security of gold," said David Morrison of privately-held fund GFT.
But he added that further potential downside shocks, such as that caused by Dubai's debt crisis, could not be ruled out.
COPPER CLIMBS, OIL FALTERS
Copper for three-months delivery on the London Metal Exchange hit a 14-month high at $7,122 a tonne. It later traded at $7,090 a tonne compared with $7,075 on Tuesday.
"Chasing risk appetite again is back on the agenda, as some of those concerns about Dubai have now receded," said Robin Bhar, an analyst at Calyon.
"We're seeing a bit of a relief rally because the world has not come to an end, because this domino threat from Dubai hasn't yet materialised and does not pose as much of a threat to the global recovery as Lehman Brothers did last year."
Copper prices are up more than 130 percent so far this year. They remain some way off a record peak of $8,940 struck in July 2008.
Government-owned Dubai World will meet its main creditors next week to discuss a request to delay payment on $26 billion in debt.
U.S. crude futures fell below $78 a barrel after industry data showed a surprise build in U.S. crude stocks, raising doubts over demand recovery in the world's largest energy user.
The market was waiting to see whether U.S. government data later on Wednesday would confirm the increase.
With inventories well above the five-year average, doubts about the pace of a demand-led recovery stayed in focus.
"I rather think people are looking at the economy and saying is recovery really there? The stimulus is running out of steam," GFT's Morrison said.
On grain markets, corn and wheat futures lost ground as inflows from investment funds dried up and large supplies weighed on the market.
Chicago Board of Trade corn for December delivery fell 0.5 percent to $3.98-1/4 a bushel and December wheat lost 0.3 percent to $5.60-3/4.
