Commodities roar into 2008

By Veronica Brown

LONDON (Reuters) - Commodities rang in the New Year in spectacular style, scoring several record highs, and there is more to come as investors flee the spectre of inflation.

The first trading day of 2008 saw oil blaze a trail to $100 a barrel and gold rush past $850 per ounce as financial markets reflected worries from the past year.

Dollar weakness, expectations for further U.S. interest rate cuts and fallout from the global credit crunch all continued bringing cash into commodities.

Other basic resources jumped on the bullish bandwagon, with platinum scoring record highs while crude's rally rippled through the energy complex.

European gas oil, U.S. heating oil and RBOB gasoline futures all hit record highs on Wednesday. The feel-good factor fanned out to palm oil futures, which also marched to a historic peak.

Pension funds and other long-term investors have pumped well in excess of $100 billion (50 billion pounds) into commodities over the past five years, often using long-only passive indices like the S&P GSCI .SPGSCITR that require investors to buy and hold positions.

"More passive investment money is being allocated to commodities and especially crude oil," said Evan Smith, fund manager at Texas-based U.S. Global Investors.

Oil is particularly attractive for long-only investors at the moment because of a market structure that helps to magnify returns.