LONDON (Dow Jones)--Metals prices are continuing their ascent Monday, defying underlying fundamentals as the unprecedented weight of investment money helps lift the markets to fresh 2009 highs. Copper, an industrial metal used in construction and housing, is at the $7,010 a metric ton level in early London Metal Exchange trade, despite the fact that stocks in LME warehouses are at levels last seen in April. Gold meanwhile continues to power higher, with the precious metal leaping to another record high of $1,167.55 a troy ounce overnight. Investment flows into commodity markets have come in at levels never seen before, with Barclays Capital estimating that some $55 billion has entered the asset class year-to-date. This exceeds the previous record of $51 billion achieved in 2006. "The wall of money floating around in the financial system continues to benefit commodities as a way of diversifying portfolios and in order to shield investments from a non-negligible risk of a U.S. debt and currency crisis," said Ole Hansen, Manager for Futures and Fixed Income at Saxo Bank. The gains in the complex leaders of copper and gold are helping to underpin the other metals, but especially the precious metals. Silver is now nearing $19/oz, a level last seen in July 2008, while platinum and palladium are at 15-month highs. The U.S. dollar is playing a central role in commodity price moves, with the carry trade--when investors borrow the currency and then sell to invest in foreign securities--contributing to its weakness. With U.S. interest rates near zero, carry traders have shifting asset allocations from cash to commodities as well as equities and fixed income. But concerns are increasingly mounting that the metals prices, which have by far outperformed other commodities such as oil and agriculture, are due a severe correction. "Despite significant surpluses in physical commodity markets that is mirrored in rising inventories, commodity prices continue to rise," said Eugen Weinberg of Commerzbank. "Apparently, the absence of physical demand is being compensated for by investors," he added. This is especially true of the industrial metals, which have already exceeded analyst forecasts for average prices in 2010. While the longer term picture remains relatively positive given expectations for a revival in economic growth and a pick-up in demand from key markets in the U.S. and Europe, right now the situation looks less rosy. It's a slightly different story for gold. If investors truly believe that the U.S. dollar will continue to depreciate and have lost faith in its attractiveness as an currency, then gold only stands to benefit further. As concerns over dollar weakness and inflation persist, the list of influential hedge fund investors in gold is growing, including Paul Tudor Jones, John Paulson, David Einhorn and Kyle Bass. With much dependent on the dollar, the jury's out on whether investors will look to book profits as the year-end approaches. Liquidity in the financial markets, through central bank action and dollar weakness, doesn't appear to be going away. Foreign Exchange and Fixed Income analyst Steve Barrow at Standard Bank said that if investors choose to take profits, it'll likely only provide a temporary setback to the trends of firmer stocks and a lower dollar.

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