Commodities such as copper, gold, crude oil, corn and soybeans next year will extend gains in emerging markets boost aggregate demand, as supplies tighten, Morgan Stanley, said.
World gross domestic product will increase by 4.2 percent in 2011 to almost 5 percent this year, with more than 70 percent of the growth coming from emerging markets, the bank said in a report. It said at that favors natural gas, live cattle and feeder cattle and zinc.
Copper rose to a record yesterday on the London Metal Exchange as head of the stock of inventories for the first annual contraction since 2004. Gold hit a record high this week as investors sought an alternative to currencies. The S & P GSCI index of 24 commodities rose this week to the highest level in over two years.
"Growing demand, along with a tightening of supply, provides nourishment for our spirit constructive widely throughout the commodity space," said Morgan Stanley analyst Hussein Allidina in the report. "The decline in inventories not only raise spot prices, but also improve the performance of roll", as falling stocks prices move in backwardation call when the commodity trade over the nearby contracts more Long term, he said.
Copper, Gold
Copper for delivery in three months traded at $ 9,051 a tonne at 12 pm on the LME. The metal will average $ 7,900 a tonne next year, Morgan Stanley estimates, compared with an average so far this year of about $ 7,465. Gold for immediate delivery touched $ 1,431.25 an ounce on 07 December. It will average $ 1,315 an ounce in 2011, the bank said. Crude oil averaged $ 100 a barrel, corn will average $ 5.75 a bushel and soybeans will average $ 12.50 a bushel, estimates of the bank.
"The prices of corn and soybeans both need to rise to ration demand," said Allidina. "Demand is running too hot because tight inventories and limited area. Gold will benefit from continued investment demand, the result of continued expansion of money supply and persistent global sovereign risk."
Responsible for Federal Reserve policymakers meet next week to discuss a potential plan to expand the Treasury purchases beyond the $ 600 billion already announced. Fitch Ratings said yesterday that the European Central Bank purchases of bonds may be necessary to increase and the enlarged European rescue fund to curb the spread of sovereign debt crisis.
Rising commodity prices can be "volatile," said Allidina. "Persistent sovereign risk, fear of policy mistakes made in emerging markets, and bouts of U.S. dollar strength will present all the headwinds."
The natural gas will be pressured by an "environment of oversupply, while zinc will be slower to return to the shortage of other metals, the bank said.
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