INFRASTRUCTURE CUTBACKS LIMITED
Sharp rise in industrial metals ahead and gold may reach $2000 - Wyke
Christopher Wyke, who oversees Schroders commodities funds,is rather less pessimistic than most on industrial metals and very bullish on gold should the dollar start to drop.
Author: Joseph Chaney, Asia Resources Correspondent
Posted: Tuesday , 10 Mar 2009
HONG KONG (Reuters) -
Government infrastructure spending will drive a rebound in metals prices, while gold may reach $2,000 an ounce in the next year if the dollar falls, an executive with UK fund house Schroders (SDR.L:Quote) said.
"The potential for very sharp price rises in industrial metals this year is very good," emerging market debt and commodities product manager Christopher Wyke told Reuters.
"We think in infrastructure the cutbacks will be very limited. When a recession happens, governments in the U.S. and elsewhere accelerate infrastructure spending."
He said that despite the global economic downturn, Asia retains its appetite for infrastructure spending, which will support prices of metals such as copper and zinc. Prices of the two metals have fallen around 58 percent and 54 percent respectively from a year earlier.
"The problems in Asia are not structural, they're essentially cyclical -- a very severe cyclical downturn," the London-based Wyke said in an interview at his firm's Hong Kong offices.
Wyke does not directly manage funds but oversees Schroders' commodities fund products which hold $4.5 billion in assets, including a recently launched gold and metals fund.
He said Chinese infrastructure spending will be a key driver of metals demand and prices.
"The level of credit in China has been shrinking in the last 10 years, the banking system has been reformed, and they have $2 trillion in reserves," Wyke said.
"So, is it likely there's going to be wholesale abandonment of infrastructure investment in China? No."
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