A wave of money is flooding into the commodity markets, adding more lustre to gold and pointing a spotlight on obscure markets such as coffee, cocoa and palm oil, as investors take fright from credit risk and the looming spectre of recession.

Gold and platinum hit new records yesterday as traditional investors sought out safe havens for cash in troubled times. Concern over emerging signs of recession in the United States depressed the price of crude oil, which seesawed in indecision yesterday, but coffee and cocoa soared as investors searched for the next commodity stars.

The price of Robusta coffee futures gained $25 to $2,039 per tonne in London, the highest level for nine and a half years. Cocoa was also in demand, rising to £1,148 per tonne, a four-year high, as speculative funds sought exposure to soft commodities.

Palm oil also hit a record price as evidence emerged in official statistics that floods in Malaysia had affected output. The price of palm oil, used in both food and cosmetics, has risen 8 per cent in less than a fortnight with continuing concern about its use as a biofuel crop and burgeoning demand from the food industry.

“It’s a global warming hedge,” said Tim Bond, head of asset allocation at Barclays Capital, of the new fashion for soft commodities. “The last three to four years has seen a rebirth of institutional interest in commodities.”

From buying global commodity indices, funds have moved to futures in oil and metals and latterly to green and soft commodities, such as wheat and corn or cocoa and coffee. Commodities fell deeply out of fashion in the 1990s but rising affluence in Asia is putting pressure on food supplies, while climate change is threatening food production.

From almost zero allocation, funds have given commodities a big slice of their portfolios. “People doing portfolio optimisation find they need between 10 per cent and 20 per cent,” Mr Bond said.

After the initial surge in oil and base metals, wheat, corn and soya are in demand and the search is now on for the next commodity to catch fire. Sudakshina Unnikrishnan, Barclays’ soft commodities expert, believes it may be cotton. A massive price gain in wheat, which tripled in value in a year, is expected to lead to more planting by farmers and land is switching from cotton to wheat production. “I think the fundamentals for cotton are very strong,” she said.

US market statistics show rising levels of speculative activity in the soft commodities. “Most of these commodities are seeing strong growth in hot money interest. The fundamentals are so compelling,” said Ms Unnikrishnan. Many food commodities remain as much as 50 per cent off their peak prices, despite recent gains.

Moreover, the soft commodities can move in a countercyclical direction, Mr Bond said.

Fear of recession sent oil falling by a dollar yesterday after an initial bounce caused by comments on Thursday from Ben Bernanke, Chairman of the Federal Reserve, who promised “substantial action” from central banks to head off a downturn. At $93 per barrel, the US light crude futures contract is off 7 per cent from its milestone of $100 on January 3.

However, gold and platinum yesterday reached records of $898 and $1,568 per ounce respectively. On Tuesday, US soybean futures reached a record of $13.06 per bushel.

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