Gold firm but future for other commodities unclear
biz.yahoo.com
Friday September 21, 12:44 pm Eastern Time
By Sharman Esarey
LONDON, Sept 21 (Reuters) - Gold prices held firm on Friday in Europe but it was unclear whether other commodities would advance in the new economic world emerging after the attacks on the U.S. that killed thousands and threw markets into turmoil.
Shaken by diving share markets as the world braced for U.S.-led retaliation, investors have run for cover in the safety of hard assets like bullion, but whether this continues and takes in other commodities is unclear. ``(The events have) changed the world and that will take a long time to assimilate,'' said David Harding, managing director of financial and commodity futures managed fund Winton Capital.
``In our little way management funds will get increased allocation from other funds,'' he said, but added that managed funds volumes were dwarfed by equities and would see only a small stream of the flood of capital deserting equities. London-based Winton has some $260 million under management.
In the days since the attack, commodities have outperformed equities -- although raw materials, too, have posted declines. Since September 10, the Commodities Research Bureau Index in the United States has outperformed the blue chip Dow Jones Industrial Average by 15 percent, although it has fallen two points to 195.55. For the year as a whole the CRB has outperformed the Dow by 18 percent.
Robin Edwards, president of London-based hedge fund Sabre, said those commodities with strong underlying fundamentals -- sugar, cocoa, aluminium, lead and lumber -- have held up well and could present buying opportunities in a couple months. Sabre has some 500 million pounds under management. ``For the brave, commodities represent an opportunity medium-term,'' Edwards said.
``We will have a recession but interest rates are so low that growth will come back with a bang.'' Asked whether he would be putting more money into commodities in coming months, he said: ``Yes, I will, and commodity shares are also quite interesting.''
Bullion traders also see gold continuing firm.
``Gold will play a role in the coming weeks and months, directly in response to the fact that there's nowhere else to put your money. The equity markets are tumbling, and there's no return to be had on treasuries,'' a gold trader said. ``You have to imagine a fund manager who has exposure to equities, bonds and other assets, even simply dollars -- if they want to balance their portfolio, they obviously have to buy gold,'' one London gold trader said.
But GNI analyst Lawrence Eagles disagreed. ``Gold has a rather brief day in the sun,'' Eagles said. ``Even gold is only a reserve asset in times of major uncertainty -- that is why gold rallies at times of war, but not just any war, in times of global financial instability.''
Base metals and steel have risen in past global conflicts, but one fund manager said the latest crisis was unlikely to bring a repeat of the battlefields of past world wars. |
