Sugar rose the most in a week on speculation investors such as index funds are buying the sweetener after the price fell this year.
The Dow Jones AIG Index will rebalance its basket of 19 commodities next month, Daniel Raab, managing director of AIG Financial Products Corp. in Wilton, Connecticut, said last week.
Funds that follow the index may have to buy more commodities that declined in 2007 to restore target weightings, Raab said. Sugar dropped 7.2 percent this year before today.
There's a lot of speculative interest in sugar, it's been down and remained in that range for a long time.
Sugar futures for March delivery rose 0.07 cent, or 0.6 percent, to 10.97 cents a pound on ICE Futures U.S., formerly known as the New York Board of Trade. It was the first gain since Dec. 20.
Sugar has climbed for three straight weeks on speculation funds that follow commodity indexes are buying the contracts. The UBS Bloomberg Constant Maturity Commodity Index has gained 23 percent this year.
What drove it up was a lot of heavy fund buying. Sugar will probably trade between 10.75 cents and 11.5 cents in the near term, he said.
Surging crude-oil prices and President George W. Bush's signing of legislation last week promoting ethanol use are spurring speculation that the U.S. may boost imports of the fuel. Brazil, the world's largest sugar producer, is diverting
more of its cane crop to ethanol.
Double-bottom is formed in sugar chart, a sign that downtrend has ended and uptrend will proceed next.
Sugar is trading uptrend based on shorter term chart
Sugar charts can be found in my blog.