Story by REUTERS
Publication Date: 1/2/2008
Investors in commodity indexes in 2007 saw some of their biggest gains in 30 years, as five indexes in the energy, metals and agricultural markets end the year with profits of almost 30 per cent on average. Early indications for 2008 are that growth in China and other emerging markets will keep demand for raw materials bubbling, while trouble in nuclear-capable states like Pakistan could send oil and gold to new record highs.
Even the prospect of a recession hitting the US economy next year has a possible bright side for commodities. If the Federal Reserve continues to cut interest rates in an effort to spark the economy, the automatic weakening of the US dollar would make commodities priced in dollars more attractive in foreign-exchange terms.
“Looking ahead, I think the overall range of prices could be drifting higher just as a result of the costs for producing additional supplies,” said Dan Raab, managing director at AIG Financial Products, which runs the Dow Jones-AIG Commodity Index.
“The growth in the developing countries has also become a much more significant feature of the demand picture for commodities, although a slowdown stemming from the U.S. could withhold some of that,” Raab told Reuters.
International security concerns — including what might happen in nuclear-armed Pakistan in the wake of Benazir Bhutto’s assassination — could result in new peaks for safe-haven assets like gold.
“I see gold at over $950 by middle of next year for sure,” said Zachary Oxman, senior trader and analyst at Wisdom Financial.
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