From gold to grains to oil, commodities finished 2010 at or close to their highest levels in years.

Gold closed Friday at $1,421.40 an ounce, up roughly 31 percent for the year after an almost uninterrupted climb since January. Grains and soybeans capped off a rally that started this summer and oil prices ended the year at levels many analysts considered unachievable just six months ago. The jump in commodity prices has been driven by China's seemingly insatiable demand for raw materials and speculators betting that they could profitably ride the momentum higher. Analysts expect the price increases, and volatility, will continue well in 2011.

"People are looking to get out of the dollar, and stocks have run up so much that commodities are looking like a good alternative," said Spencer Patton, founder and chief investment officer for hedge fund Steel Vine Investments LLC.

Gold was the clear standout in 2010. It traditionally has been viewed as a classic shelter investment, often used as a hedge against inflation. That kept it idling for much of the decade before the global financial crisis emerged in 2008. Then, as central banks started taking dramatic actions to stimulate their economies, gold starting moving higher as interest rates dropped to record lows and some currencies fell in value. That led some investors to predict higher inflation is inevitable. Other precious metals, like silver, also moved higher.

"Gold is much more of a universal hedge, and that's why there is more of a dramatic price movement," says Edward Meir, senior commodities analyst at MF Global in New York.

Gold should continue to rise well into the second half of 2011, said Rohit Savand, senior commodity analyst with CPM Group in New York. Political instability — such as military tensions on the Korean peninsula — coupled with further stimulus plans and bailouts in Europe mean gold's safe-haven status will keep it in high demand.

Industrial metals, used to make everything from computer parts to automobile engines, also gained as global consumption and manufacturing started to recover. Copper surged more than 40 percent, rising from just over $3.00 a pound to close the year at $4.4470.

Meanwhile, 2010 marked one of the most profitable years ever for farmers in the U.S. Midwest. The USDA predicts that net farm income for 2010 will be $81.6 billion, up 31 percent from 2009 and about 26 percent higher than the annual average over the past decade. Farm incomes are likely to keep growing in 2011 on strong commodity prices and export demand, according to a report released Wednesday by the Kansas City Federal Reserve Bank.

Smaller reserves of corn and soybeans this year couldn't satisfy ever-growing global demand, sparking a price rally over the summer that has yet to abate. Wheat prices also climbed as droughts, fires and heavy rains around the world slashed the amount of grain for harvest. With Russia's post-fire grain export ban likely to remain in place throughout 2011 and European exports expected to be exhausted in January, the U.S. looks increasingly likely to be the supplier of last resort in the coming year, JPMorgan Chase analyst Colin P. Fenton said in a recent report.

A key factor in corn's rise has been demand from the ethanol industry, said John Sanow, an analyst with Telvent DTN in Omaha. About 1.6 billion bushels of corn went to making ethanol in 2005. By 2010, it grew to 4.8 billion bushels as federal mandates for increased ethanol use in the nation's fuel supplies kicked in. In addition, China in recent months has become a significant net importer of corn for the first time, noted Credit Suisse analyst Edward Morse. As a result, corn futures have risen nearly 80 percent since August, climbing from about $3.50 a bushel to end the year at a more than two-year high of $6.29. And prices should keep jumping, says Sanow, since this year's U.S. harvest appears to be smaller than many analysts had predicted, which will exacerbate a supply squeeze.

For soybeans, the demand pressure has come largely from China, which has increased its soybean consumption by an average 257 million bushels each year over the last four years, Sanow said. Much of that has gone toward feeding livestock, and a Chinese middle class increasingly hungry for meat is only likely to boost demand next year, he said.

Raw commodity ingredients account for only a fraction of the price of food at the grocery store, so it can take months if not longer for commodity price increases to hit consumers. But food makers like Hormel Foods Corp. have said they will be hiking prices on a variety of products in 2011 to recoup costs.

Increased demand from China and India has also helped stoke the rise in oil and energy prices in the second half of the year. Oil prices hit a low around $70 a barrel late in May as traders worried that debt problems in Europe and high unemployment in the United States would keep economic growth stagnant and energy demand low. But increasing demand in the developing world has changed all that. Oil surpassed $90 a barrel this month and remained above the threshold to close the year at $91.38 a barrel.

"I think we could be above $100 (a barrel) in January," Patton said. If so, that means $4-a-gallon gas could be a reality by summer in some parts of the country. Rising gas prices would threaten to slow already weak U.S. economic growth and squeeze consumers as companies pass along higher energy costs in the form of higher airline tickets, shipping prices and even the cost of ordering takeout.

Commodity prices closed out the last trading day of 2010 with across the board increases.

Silver contracts for March delivery rose 42.4 cents to $30.937 an ounce. January palladium settled up $17.10 at $803.30 an ounce and December platinum gained $29 to close at $1,773.30 an ounce. In Nymex trading in January contracts, heating oil rose 5.83 cents to settle at $2.54.37 a gallon, and gasoline climbed 6.14 cents to $2.4532 a gallon. Natural gas for February delivery rose 6.7 cents to $4.405 per 1,000 cubic feet.

Grains and soybeans also closed Friday higher. March wheat rose 9.5 cents to settle at $7.9425 a bushel and March soybeans added 27 cents to close at $14.03 a bushel.