NEW YORK: Gold hit record highs for a second straight day on Wednesday and oil soared to fresh 2-1/2 year highs, sparking fears of inflation that could hurt some of the world's most dependable economies.
Price pressures were rising in Asia's emerging economies -- which were the catalyst for the world's recovery from the financial crisis -- and were unlikely to subside soon, the Asian Development Bank cautioned.
"High inflation is a direct threat to stable and inclusive growth since rising domestic prices can lead to social tensions," the ADB said in a report.
"High and volatile oil and food prices will, in particular, reverberate through the world economy, and they are likely to stay that way in 2011-2012," the Manila-based agency said.
The Reuters-Jefferies CRB index, a global benchmark for commodities, hit a one-month high, responding to the broad rally in the 19 markets it tracks, including oil and gold.
Gold has become more of a currency than a commodity these days, acting as a hedge against a weaker dollar and political troubles that weigh on currency values.
The spot price of gold, which reflects trading in bullion, traded at just below $1,460 an ounce late Wednesday in New York, after soaring to an all-time high of $1,461.91 during the session -- up more than $5 from Tuesday's peak.
In gold futures, the June contract in New York settled up 0.4 percent, after hitting a record high of $1,467.00.
Silver, the poorer investor's alternative to gold, hit 31-year highs of $39.75 an ounce in spot trading.
The rally in precious metals came as the dollar fell to a 14-month low against the euro ahead of a widely anticipated interest rate hike by the European Central Bank on Thursday.
The ECB is expected to press ahead with the rate hike despite Portugal's unmanageable sovereign debt -- another factor that had been underpinning gold.
Analysts said gold could go higher if the ECB hike is emulated by other central banks, weighing further on the dollar. "It looks more like a series of interest rate hikes" is coming, said John Doyle, strategist at Tempus Consulting in Washington.
In industrial metals, US copper futures for May finished up 2.5 percent at $4.37 a lb. It hit a one-week high of $4.3790 earlier in the session.
Oil rose to a fresh 2-1/2 year peak, supported by unrest in the Middle East and North Africa and dollar weakness.
In New York, crude oil climbed nearly half a percent to finish at $108.83 per barrel -- its highest close since September 2008. US crude prices are up nearly 20 percent on the year.
London's Brent crude finished almost flat, rising just 8 cents to settle at $122.30 per barrel after rising above $123 earlier -- its highest since August 2008.
Brent oil has risen about 30 percent since the start of this year, rising first on the political upheaval in Egypt before rocketing on the civil war in Libya, which shut down all of the country's oil exports.
Oil prices could rocket to $200 per barrel and even $300 if Saudi Arabia -- which has stepped in to plug the supply gap left by Libya -- is also hit by serious political unrest, former Saudi oil minister Sheikh Zaki Yamani told Reuters on Tuesday.
A Reuters poll of bank analysts and hedge fund managers published on Wednesday showed that Brent's four-day rally to above $120 a barrel will soon fizzle out, but could roar back to above $130 in the second half of this year if there is no end to the Middle East crisis.
US corn futures finished down half a percent, not too far from record highs reached on Tuesday, as worries over low US stockpiles continued to support the grain's price.
Corn for May delivery on the Chicago Board of Trade closed down 3-3/4 cents at $7.63 a bushel. It hit an all-time high of $7.70-3/4 on Tuesday.
Corn prices have jumped more than 15 percent since a US Department of Agriculture report last week showed unexpectedly low stockpiles as of March 1.
Corn is primarily used in food products and as feedstock for animals, but increasingly large amounts are being distilled into the renewable fuel ethanol. Demand for ethanol, as oil and fuel prices rise, have led some analysts to predict corn prices as high as $9 a bushel this year.