Gold, Copper, Oil, Corn Will Extend Gains Next year, Morgan Stanley Says
By Nicholas Larkin - Dec 10, 2010 5:07 AM PT
bloomberg.com
Commodities including copper, gold, crude oil, corn and soybeans will extend gains next year as emerging markets drive global demand while supplies tighten, Morgan Stanley said.
Global gross domestic product will increase by 4.2 percent in 2011 from almost 5 percent this year, with more than 70 percent of the growth coming from emerging markets, the bank said today in a report. It said it least favors natural gas, live cattle and feeder cattle and zinc.
Copper yesterday advanced to a record on the London Metal Exchange as the bourse’s inventories head for the first annual contraction since 2004. Gold reached an all-time high this week as investors sought an alternative to currencies. The S&P GSCI index of 24 raw materials this week climbed to the highest level in more than two years.
“Growing demand, together with a tightening supply side, provides the fodder for our broad constructiveness across the commodities space,” Morgan Stanley analyst Hussein Allidina said in the report. “Declining inventories will not only lift spot prices, but will also improve roll returns” as falling stockpiles move prices into so-called backwardation, when nearby commodities trade above longer-term contracts, he said.
Copper, Gold
Copper for three-month delivery traded at $9,051 a metric ton at 12 p.m. on the LME. The metal will average $7,900 a ton next year, Morgan Stanley estimates, up from an average so far this year of about $7,465. Gold for immediate delivery touched $1,431.25 an ounce on Dec. 7. It will average $1,315 an ounce in 2011, the bank says. Crude oil will average $100 a barrel, corn will average $5.75 a bushel and soybeans will average $12.50 a bushel, the bank estimates.
“Corn and soybean prices both need to rise to ration demand,” Allidina said. “Demand is running too hot given tight inventories and limited acreage. Gold will benefit from continued investment demand, stemming from a continued expansion in global money supply and lingering sovereign risks.”
Federal Reserve policy makers will meet next week to discuss a potential plan to extend Treasury purchases beyond the $600 billion already announced. Fitch Ratings yesterday said the European Central Bank’s bond purchases may need to be increased and Europe’s rescue fund expanded to stem contagion from the sovereign-debt crisis.
The gain in commodity prices may be “volatile,” Allidina said. “Lingering sovereign risks, fears of policy missteps in the emerging markets, and bouts of U.S. dollar strength will all present headwinds.”
Natural gas will be pressured by an “oversupplied environment,” while zinc will be slower to return to a shortage than other metals, the bank said.
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net |
