May 5 (Bloomberg) -- Copper prices rose to a record in London as threats to production fueled buying by investment funds. Zinc also climbed to an all-time high for a second day.
Copper has risen 76 percent this year as disruption at mines from Indonesia to Mexico limits supplies at a time when demand is increasing. Pension and hedge funds are pouring money into commodities to tap returns that are outpacing other assets. Fund investments in commodities may exceed $120 billion by 2008, up from $80 billion last year, according to Barclays Plc.
``Every hedge fund and gun slinger is getting into this market,'' Sean Corrigan, chief investment strategist at London- and Lausanne-based Diapason Commodities Management SA, which oversees $4 billion in assets, said in a telephone interview.
Copper for delivery in three months rose as much as $150, or nearly 2 percent, to $7,800 a metric ton and traded at $7,670 as of 10:21 a.m. on the London Metal Exchange. Zinc advanced $15, or 0.4 percent, to $3,455 a ton, trading as high as $3,490.
Strikes and delays have depleted the world's stockpiles of copper, a metal used in wiring and plumbing equipment. Inventory in warehouses monitored by the London Metal Exchange dropped 1,725 metric tons, or 1.5 percent, to 114,250 tons, the LME said in a report today, the biggest decline since April 5. Zinc inventory fell to the lowest in five years, losing 1,700 tons, or 0.7 percent, to 255,900 tons.
A six-week strike at a mine operated by Grupo Mexico SA, the world's No. 7 copper producer, is no nearer ending, the company said yesterday. Workers at Falconbridge Ltd.'s Lomas Bayas copper mine in Chile, the world's largest copper-producing nation, threatened to strike on May 8, asking for higher wage.
Yearlong Rally
Metals are leading a yearlong rally in commodities from gold and sugar to crude oil, as investors seek better returns than stocks and bonds. The Standard & Poor's index of shares has risen 5.1 percent this year. U.S. Treasuries have lost investors 1.9 percent this year, according to Merrill Lynch & Co. indexes.
Gold rose to a 25-year high in London today as increased tension between Iran and the U.S. spurred investors to buy the precious metal as a haven and a hedge against inflation.
Iran, the world's fourth-largest oil supplier, yesterday rejected U.S.-led demands that it halt uranium enrichment. Crude oil prices have risen to a record on concern over disruption to Iranian oil supplies, raising concern about inflation and increasing the appeal of bullion as a hedge.
``Gold may rise to $1,000 before June should the situation in Iran intensify,'' said Bernard Sin, chief trader at Geneva- based MKS Finance, a precious-metals trading and refining company, in an interview.
Gold for immediate delivery in London rose as much as $5.20, or 0.8 percent, to $684.90 an ounce. It traded at $682.32 as of 9:17 a.m. local time. The metal is headed for a weekly gain of 4.3 percent, an eighth consecutive weekly advance.
Aluminum jumped $33, or 1.2 percent, to $2,908 a ton, the highest level since June 1988.
