Analysts bullish on 2009 commodity market fortunes

Gold has performed well in comparison to commodities such as base metals and crude oil as well as other asset classes like equities, debt, realty and bank fixed deposits. The yellow metal made an all-time high of $1032 per ounce in March due to a weak dollar, rise in crude oil prices and good investment flows. Prices fell to $681 level in October but have recovered to current level at $885. According to Naveen Mathur of Angel Commodities gold will continue being a favourite commodity with investors. He sees the metal getting support at $650 with a potential to exceed its record high of $1030 per ounce. Other analysts too are bullish on gold with Kishore Narne, research head, Anand Rathi commodities, predicting $1200 levels by mid-2009. “With liquidity infusion across the globe, paper currency will see an erosion in value and gold will be a better vehicle for investment,” says Mr Narne.In 2008, most of the commodities were on a rollercoaster ride. Crude oil, copper, soybean and crude palm oil hit alltime highs. Prices however could not sustain at those levels and there was a fall in investment flows into commodities following the US subprime mortgage crisis and the global financial turmoil in its aftermath. Also, after July, the dollar recovered and demand destruction with the onset of a global recession and inventory build-up led to a sharp fall in crude oil and base metal prices. In the case of edible oil complex (oilseed and oil), lower stock holding and rally in crude oil supported the prices during period January to June 2008. Thereafter due to good production estimates and fall in crude oil prices the complex was pulled down. But now when most of the governments are announcing economy stimulus packages and banks slashing down the interest rates to ease money supply things might improve even for commodities like base metals and crude oil. Jayant Manglik of Religare Commodities said that following gold, 2009 will also see demand picking up for base metals and crude oil with establishment of demand and supply equilibrium. “Investors will go long gold, crude oil and metals,” says Mr Manglik. Strong growth recorded by China, a major base metals consumer, led to sharp rise in metals until mid-2008 following stocking and a rise in industrial activity. Copper hit an all-time high of $8930 per tonne in first week of July due to rise in construction activity, but prices thereafter fell to $2800 level. Even crude touched an all time high level at $147 per barrel and thereafter fell by 75%.