Commodity markets were set to end 2010 with a second year of gains, with copper powering to record highs and oil heading for its eighth rise in nine years, while investors prepared for the rally to continue into 2011.
|||Commodity markets were set to end 2010 with a second year of gains, with copper powering to record highs and oil heading for its eighth rise in nine years, while investors prepared for the rally to continue into 2011.
The precious metals complex has had a stellar run this year, led by palladium's 94 percent rise, in a broad commodities rally that pushed the 19-commodity Reuters-Jefferies CRB index up 15 percent in a second consecutive year of gains.
The uncertainty over the U.S. economy this year has undermined the dollar, while emerging economies such as China have continued to devour raw materials even as policymakers raise interest rates to quash inflationary pressures.
Industrial commodities such as copper, palladium and crude oil have benefitted from the robustness of emerging economies, while financial market volatility has pushed investors into gold and changing weather patterns have driven agricultural products to multi-year highs.
“What's the best thing about commodities? Bonds. If you're a pension fund, you should not be involved in bonds because inflation is destroying the yield,” said Patrick Armstrong, a fund manager for Armstrong Investment Managers, which oversees $220 million in assets.
“People are turning away from bonds and looking for things that deliver real returns,” he said.
RECORD COPPER
Copper for delivery in three months on the London Metal Exchange hit a record high of $9,645.50 a tonne and was trading at $9,638.00 by 14:15 SA time, up from $9,490 on Thursday, having risen by 30.7 percent this year.
“Copper is the top pick for the metals next year simply because of strong fundamentals,” said Andrey Kryuchenkov of VTB Capital.
“It looks like the bullish momentum is here to stay, also because of falling copper grades, industrial action, supply disruptions - that's the copper story,” he added.
The global market for refined copper is seen moving into a supply deficit next year of 400,000 tonnes due to declining ore grades in Chile, the world's top producer, and a lack of large new projects.
Oil was set to close the year up more than 12 percent, despite a slight decline on Friday, driven by a resurgence in global demand, an unusually cold winter and falling inventories. It was also on track to average $79.60 a barrel for the year, second only to the 2008 record of $99.75.
After rallying since May to a 26-month high of $91.88 on Monday, the U.S. crude February contract was down 30 cents at $89.54 a barrel on Friday.
“December is set to be the strongest month of the year in demand terms, with particularly strong indications of gasoline demand,” said analysts at Barclays Capital in a research note.
SHINING GOLD
Gold rose on Friday, notching up its strongest annual performance since 2007 and marking a fifth straight month of gains in December, driven by a weaker dollar and global economic uncertainty.
Spot gold rose 0.6 percent to $1,412.26 an ounce, on course for a 29 percent annual gain, its tenth consecutive yearly increase.
“It is still a positive picture for metals next year. There is sufficient demand from investment perspective to maintain a relatively bullish trend, in gold in particular,” said Darren Heathcote, head of trading at Investec Australia in Sydney.
Traders and analysts expect gold to break above $1,500 in 2011.
U.S. wheat futures were flat on Friday, having risen by 44 percent this year following two straight years of losses.
Chicago Board of Trade March wheat rose 0.03 percent to $7.85 a bushel. Corn for March delivery gained 0.4 percent to $6.18-½ a bushel, and soybeans for January rose to $13.76 a bushel.
Wheat futures have been driven higher as dry weather has hurt the winter crop in the United States and excessive rains have hit crop quality in Australia. In addition, a devastating Black Sea-region drought earlier this year forced Russia to ban grain exports and prompted Ukraine to curb shipments.
Corn and bean futures also rose to their highest levels in more than two years this week as dry weather threatened to damage output in Argentina, the world's second-biggest corn exporter, No. 3 soybean supplier and the top provider of soyoil and meal. - Reuters
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