May 10 (Bloomberg) -- Copper rose to $8,000 a ton for the first time as a mine closure in Mexico fueled speculation among investment funds that returns from metals will keep outpacing stocks and bonds.
Gold also rose to a 25-year high, platinum and zinc were at records and aluminum climbed above $3,000 for a second day. Copper has gained as labor disputes and production threats from Mexico to Indonesia have dented global metal stockpiles. Grupo Mexico SA, the world's seventh-largest copper miner, said today it shut the San Martin mine as a strike deepened concern about safety.
``It's hard to see how the momentum can stop at this moment,'' said Roy Carson, a London-based trader at Triland Metals Ltd., which trades on the floor of the London Metal Exchange, the world's biggest metals bourse. ``Continued speculative buying'' is stoking prices.
Copper for three-month delivery advanced as much as $195, or 2.5 percent, to $8,010 a metric ton, and traded at $7,905 as of 10:06 a.m. local time on the LME. The metal, used in wiring and plumbing, has risen 81 percent this year.
Pension and hedge funds are pouring money into commodities as raw materials from sugar to oil produce returns that are outpacing other assets. Crude oil has gained 16 percent this year in New York and traded above $71 a barrel today. Fund investments in commodities may exceed $120 billion by 2008, up from $80 billion last year, according to Barclays Plc.
Stocks, Bonds
The Standard & Poor's index of shares has risen 6.2 percent this year, while U.S. Treasuries have lost investors 1.7 percent, according to Merrill Lynch & Co. indexes.
``There may have been additional money coming to metals from the fixed-income market,'' Michael Lewis, head of commodities research at Deutsche Bank AG in London, said by phone. ``It's the catalyst for the latest move higher. There hasn't been anything in the metals complex to short-circuit the rally.''
Grupo Mexico closed its San Martin copper and zinc mine after the company failed to end a strike that has halted production since March, spokesman Juan Rebolledo said in a television interview.
``It's impossible to even hope that this is going to be resolved,'' Rebolledo said today in an early-morning interview on TV Azteca. ``That's why we closed it.''
Mine closures and declining ore grades have helped cut copper stockpiles to the equivalent of about three days of global consumption. Inventory tracked by commodity exchanges in London, New York and Shanghai has slumped 11 percent in the past month to 147,886 tons. BHP Billiton, the world's No. 1 miner, said on May 4 supplies will be limited through 2008.
Daily `Evidence'
``Every day we see further evidence of supply disruptions,'' Alfred Wong, who helps manage $12 billion at UOB Asset Management in Singapore, said in a telephone interview. ``I'm not surprised at all to see this kind of rally.''
Driving demand is the booming economy of China, which has stoked use of the metals needed for factories, appliances and cars. China aims to build up strategic reserves of minerals such as uranium, copper and aluminum to help provide a buffer against supply disruptions, the Ministry of Land and Resources said on its Web site today. China's economy expanded 9.9 percent last year and 10.2 percent in the first three months of 2006.
``If you'd asked me two years ago, would copper reach $8,000, I'd have said that was very unlikely,'' William Adams, a Saffron Walden, England-based analyst at Basemetals.com, said today. ``Look where it is now. It's really extraordinary.''
Gold Gains
Gold has surged 28 percent since Jan. 9, when Iran said it had resumed nuclear research, spurring investors to buy the metal as a haven.
The metal for immediate delivery in London rose as much as $3.69, or 0.5 percent, to $704.59 and traded as high as $703.41 as of 9:54 a.m. local time. Bullion last surpassed $700 in September 1980. Platinum jumped as much as $32.25, or 2.6 percent, to a record $1,267.75 an ounce and traded at $1,257.50. Prices have climbed 43 percent in the past 12 months.
Aluminum futures yesterday rose to $3,000 a metric ton on the LME for the first time since June 1988. Aluminum for delivery in three months gained as much as $30, or 1 percent, to $3,042 a metric ton today and traded at $3,030 as of 9:54 a.m. local time. The contract has gained 33 percent this year.
Copper's gains have stoked earnings at the biggest mining companies while hurting consumers. Tyco International Ltd., the world's biggest seller of fire and security systems, on May 4 cut forecasts because of higher copper prices. Nexans SA, the world's largest copper consumer, said current record prices don't reflect supply and demand.
Speculator `Damage'
The ``damage'' done by speculators ``will bring into question whether the LME copper price should continue to be the recognized reference price for our industry,'' the copper consumer group known as the London-based International Wrought Copper Council, of which Nexans is a member, said in a statement to the LME last month.
Funds tracking commodity indexes may hold copper futures contracts equal to as much as 465,000 tons, almost three times more than physical metal stored in warehouses monitored by exchanges in London, New York and Shanghai, Bloomsbury Minerals Economics Ltd. said in a May 5 report. The shortfall in supplies of the metal may drive prices above $9,000 a ton this year, the London-based metals consulting company said.
``I don't understand the dynamics of this market anymore,'' Andrew Silver, a trader at Natexis Metals in London, said in an interview today. ``A lot of our customers have stopped trading. Nobody wants to take any risk.''
