Investors Remain Bullish On Commodities
December 16 2005 - Australasian Investment Review – (AIR)
Metals markets have fallen prey to heavy volatile trading again and at thebulliondesk.com the experts are worried we have yet to see the bottom of what could turn out to be a severe year end correction in a longer term bull market.
The increased volatility raises a warning flag as it is often a precursor to a change of direction as it suggests the bulls and the bears are vying for control, thebulliondesk reports.
As the metals have had a great run again throughout 2005, it would not be unfeasible that many investors feel compelled to take some profits before year end. Of course, this could trigger a short term negative price spiral.
Thebulliondesk believes investors should watch copper, as a move in the metal’s price below US$4330 would look bad on the charts. This would increase the chance of a more meaningful correction, which could easily see prices pull back to so-called trend line support around US$4170, with further support likely at US$4100, say the experts.
Because of its bellwether status in the sector, if copper heads lower then the other metals are likely to follow suit and the sell-off could pick-up some speed. After all, thebulliondesk remarks, the metals have not had a decent blow-out since April-May.
Having said that, a recent survey by Barclays Capital confirms the majority of professional investors is still bullish on commodities, including the metals, over a three year horizon.
According to Barclays, investors plan to "significantly" increase their exposure to commodities as they view direct investment in commodities as a long-term strategy designed to diversify their portfolios. Investors are, however, concerned about current high price levels, according to the survey, and they plan to reduce exposure to index-based products, substituting less directionally sensitive structured products such as commodity baskets and becoming more active managers of their commodity portfolios.
The survey was carried out among US investors who attended Barclays Capital’s first annual US Commodity Investor Conference in New York.
The survey also revealed that roughly two thirds already had some commodity exposure, but for most this was 5% or less of their total portfolio. Almost 70% of the respondents expected to increase their commodity exposure to 5% or more of their portfolio over the next three years.
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