By John Waggoner
USA Today

The bull market in stocks has stalled, and bonds are no longer bubbling. But commodities, particularly metals and energy, have struck gold this year.

The Commodities Research Bureau index is up 8 percent this year versus 0.4 percent for the Standard & Poor's 500-stock index.

Is there any easy way to invest in commodities, without drilling for oil in the back yard?

Sure. You can invest in stocks of mining or energy companies. You can invest in funds that specialize in natural resources. A few even specialize in buying and selling commodities. But don't wade into the futures market alone: Amateurs lose early and often.

Oil has been a star of the commodities market. The price of a barrel of oil is up 21 percent this year. But other commodities have had big rises, too: copper, 23 percent; lumber, 20 percent; aluminum, 10 percent.

Why the spike in commodities? Blame the growing economy. U.S. gross domestic product rose 4.4 percent the first four months of 2004 after a 4.1 percent gain in the fourth quarter of 2003.

"When you have growing demand, it takes suppliers a fair amount of time to respond," says Kevin Baum, portfolio manager of Oppenheimer Real Asset fund.

But the growing U.S. economy isn't the only factor sending commodities soaring. Others:

• China. China's GDP grew 9.7 percent the first quarter. "They have tremendous infrastructure build-outs," Baum says. "It's staggering." Pimco, the Los Angeles bond manager, says China is consuming 20 percent to 30 percent of the world's cement, and similar amounts of steel, coal and iron ore.

• Iraq. War also spurs consumption of raw materials, particularly steel and copper, as well as plywood. The Defense Logistics Agency, for example, is buying more than 20 million feet of plywood sheeting, mainly for U.S. base camps and guard posts in Iraq.

• Housing. The booming real estate market has also pushed up commodity prices. According to the Department of Commerce, 2.1 million homes were started in December.

Commodities fare well when inflation rises. The million-dollar question, Baum says, is whether the recent spike in some commodity prices is a warning signal of higher inflation. If companies can pass on higher raw materials prices to consumers, then some prices might rise.

The biggest component of inflation is wages - and unemployment is not low enough to spark a round of wage and price increases, Zandi says. Gold, an inflation bellwether, has moved down sharply this year.

Still, commodities usually move in a different cycle than stocks and bonds, and that can be a good thing for your portfolio in the long term.

A celebrated study by Harvard professor John Lintner showed that adding commodities to a portfolio of stocks and bonds could reduce volatility and increase returns.

And funds like Oppenheimer Real Return, which invests in commodities futures, have had stellar returns the past three years, versus losses for stocks.