Base metals and bullion may offer up to 15-25% returns on improved demand.
Industrial commodities, including base metals and bullion, are likely to continue their upward march this year on the back of supply concerns and higher demand.
Base metals and bullion could offer up to 15-25 per cent returns, as demand from both retail and industrial consumers is set to hit the pre-economic crisis level, especially from emerging markets.
Independent global advisory firm Barclays Capital has forecast that aluminium will average $2,500 a tonne this year as against $2,206 a tonne in the previous year. The current price is $2433 a tonne. Copper is expected to rise to $9,550 a tonne from $7,540 a tonne. Nickel and zinc are expected to move in tandem to average $25,625 a tonne and 2,538 a tonne this year, as against $22,035 a tonne and $2,209 a tonne, respectively, last year.
Experts believe the economic crisis being faced by small European countries like Greece and Ireland has the potential to destabilise the euro. The crisis could easily cross the Atlantic as America comes out with yet another economic booster by pumping in fresh funds into the system to increase long-term investments, especially in infrastructure. As a result, the demand for base metals is set to increase.
On the other hand, the economic crisis in Europe may force funds to choose precious metals as their preferred investment avenue.
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Bullion is promising to set new records. Gold prices may move between $1,500 and $1,600 an oz in 2011 as the metal continues to provide a hedge against the persistent quantitative easing and weakness in fiat currencies. At some stage, a sustainable economic recovery might challenge precious metals, said an analyst with Religare Commodities.
Silver is expected to be volatile in 2011 and stay between $35 and $37 an ounce (Rs 50,000-56,000 a kg) in the international market. The broking firm expects crude oil to rally towards $100 a bbl initially and says surpassing the level can result in a further rise towards $120-$135 a bbl, while natural gas is estimated to trade at Rs 240-285 an mmbtu. The volatility, however, is expected to persist and only a sustained movement above Rs 285 an mmbtu should unleash a persistent bull run in gas.
“We see ample potential for demand in the region to return to the pre-crisis levels, which, together with the emerging markets hitting the critical mass, suggests that the supply response will have to be increasingly impressive or the call on inventories will intensify. Add restocking into the mix and 2011 could transpire to be another year when demand surprises to the upside,” said an analyst with Barclays Capital.
Driven by rising demand, the ongoing economic recovery and tightening market balances, prices of industrial commodities surged in 2010. The most important factor has been the strength of the recovery in demand, which will be a record high for all base metals, except tin, this year.
Emerging market demand was the single biggest swing factor, coming in well above market forecasts. The biggest surprise is the scale of the recovery in OECD demand, particularly in Europe.
That demand can hit a record high with OECD still below pre-crisis levels for many metals is a true reflection of the structural rebalancing of the base metals towards the emerging markets. But do not discount OECD just yet, says the report.
Copper prices jumped to a record in December after China increased imports for the first time since August and there was supply disruption from Chile’s Collahuasi mine due to an accident. Copper is rising and so new records can be expected as the global supply shortage offers fundamental support and money continues to flow in amid investment demand, says an analyst with Religare Commodities.