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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: redfrecknj who wrote (4025)	12/9/2006 11:27:08 PM
From: Jamey	Respond to of 50502

JPMORGAN SAYS CORN, GOLD BEST INVESTMENT OPPORTUNITIES. Corn, Gold Best Commodity Investments, JPMorgan Says 2006-12-08 04:42 (New York) By Feiwen Rong and Chia-Peck Wong Dec. 8 (Bloomberg) -- Corn and gold will offer the best opportunities among commodity investments next year because of tight supply and a weakening dollar, outperforming oil and base metals such as copper and aluminum, said JPMorgan Chase & Co. Rising investment interest and demand from alternative fuels will drive corn and wheat higher next year at a time when inventories are the lowest in more than 20 years. Precious metals will benefit from a weakening dollar and will be shielded from a U.S. industrial slowdown, said New York-based JPMorgan, the third-largest U.S. bank. ``Precious metals, along with agriculture, should be the best performers in 2007,'' London-based analysts John Normand and Jon Bergtheil said in the report dated Dec. 7. Investors have poured $53 billion into the 250 commodities funds tracked globally by JPMorgan, of which $25 billion are in so-called ``beta funds'' which mimic the performance of commodities indexes such as the Goldman Sachs Commodity Index and involve little or no active management, JPMorgan said. Normand and Bergtheil believe that a strategy o indiscriminate investment in commodities index components may not return the best yields in 2007, ``given the diverging sector fundamentals this late in the commodity price cycle.'' In contrast to agricultural products and precious metals, base metals appear ``most vulnerable'' to either ``demand shock'' or ``forceful supply response,'' while oil is likely to be the worst performing sector due to high inventories, Normand and Bergtheil said. Corn, Wheat Corn has risen 83 percent in the past year. The commodity reached a 10-year high at the end of November after hot, dry weather in July reduced U.S. output and demand for the grain to make ethanol rose to a record. Wheat prices are up 67 percent in the past year, reaching $5.57 on Oct. 17, the highest since 1996. Still, corn prices will reach an average $4.03 a bushel next year compared with an average $2.51 this year, while wheat will rise to $5.13 a bushel from $3.95 in Chicago, JPMorgan said. The U.S. ethanol industry is estimated to ``call for an additional 500-1,000 million bushels a year of corn to meet demand'', said Normand. Output will expand on subsidies and a will to wean the nation off dependence on foreign oil, regardless of rising feedstock costs and falling oil prices. Global wheat reserves will fall to 118.8 million tons on May 31, the lowest since 1982 because Australian production will drop 57 percent to 10.5 million tons and U.S. output has declined 14 percent. Corn stockpiles before next year's harvest will fall to the lowest since 1984, the U.S. Department of Agriculture said Nov. 9. Limited Gold Supply Limited growth in supply of gold and rising investment demand through exchange-traded funds are likely to lift bullion prices, Normand and Bergtheil said. ``Gold is the only metal - base or precious - which will see no meaningful increase in mining supply next year,'' they said, estimating that supply will grow by 1 percent. A weaker dollar will also benefit precious metals, including gold, they said. Gold will average $605 this year and $678 in 2007. The 2007 forecast is 11 percent higher than JPMorgan's previous forecast. The precious metal has gained 21 percent in the past year. The analysts also lifted their 2008 forecast for the gold price to $725, 13 percent more than their previous estimate. Among base metals, nickel's forecast has been increased by the biggest margin as the recent mergers and acquisitions ``may have heralded a longer-lasting tighter `control' of that metal,'' Normand and Bergtheil said. They estimate nickel will average $22,000 a ton next year, 23 percent more than their previous projection. Turning to energy, high inventories are likely to drag the average oil price to $64 a barrel, from $67 this year, the analysts said, referring to West Texas Intermediate crude oil. The commodity traded at $63.13 a barrel today, up 1 percent.