Credit Suisse bullish on commodities in 2010

Wed Nov 11, 2009 10:36am IST

 * Credit Suisse see commodities stronger in 2010
 * Weak dlr to lift gold, demand for base metals to pick up
 SINGAPORE, Nov 11 (Reuters) - Commodity markets are set to
break higher, bolstered by improving fundamental conditions as
more and more of the world emerges from recession, Credit
Suisse analysts said in a note on Tuesday.
 The bank argued that although commodity indices moved
sideways for much of the third quarter -- the Reuters/Jefferies
CRB index traded between 250.13 and 259.39 in the third
quarter, since when indices have started to rally, with the CRB
touching a high of 285.18 in the fourth quarter so far.
 "Starting in early October, commodity indices began to
increase more decisively. We think this is the start of a more
sustained uptrend that could last for most of 2010 and possibly
even longer," the analysts said.
 "In our view, the economic environment for commodities is
now favourable enough to trigger a new cycle for prices. Supply
and demand factors are both working toward tightening market
balances and therefore toward higher prices."
 The bank saw further gains in precious metals, with gold
likely remaining strong to the end of the year, and strength
was also seen in platinum on rising demand from the automotive
sector.
 "Given prevailing dollar weakness, falling real interest
rates, strong investment demand and the positive technical
picture, we think that gold prices are likely to have a strong
rally into the end of the year.
 "Moves significantly beyond $1,100 are possible on buying
enthusiasm but are well beyond the range supported by
fundamentals."
 Energy prices were expected to consolidate and even fall
slightly in the fourth quarter, checked by large inventories of
heating oil in the United States, but prices would begin a
sustained rally in 2010 and carry on through to 2011.
 "Due to a prevailing inventory overhang in the U.S. heating
oil market and negative seasonal  effects in the fourth
quarter, we think that prices are likely to consolidate or
trade slightly lower until end-2009. However, starting in early
2010, oil prices are likely to start a more sustained uptrend."
 The bank forecast WTI crude oil rising to $90 to $95 by the
end of the first quarter of 2011.
 Credit Suisse tipped copper as a strong performer in base
metals, rising as the economic cycle develops and OECD demand
returns.
 "We expect a positive performance of base metals in the
coming months," the report said.
 "A bit further down the road, the outlook remains very
positive. Falling ore grades should keep supply tight, while
demand prospects look promising with the recovery of global
industrial production at an early stage." Commodity overview
and forecasts
                 Close Nov 9   End Q1 2010     End Q1 2011
Precious metals $/oz
 Gold               1103.80       900-1000           
1100-1200
 Silver               17.59        15-16                17-18
 Platinum           1358.00      1400-1500           
1600-1700
 Palladium           333.75       300-350              330-380
Energy $/bbl
 WTI                  79.43        75-80                90-95
 Brent                77.77        73-78                88-93
Base metals $/tonne
 Aluminium            1952       2000-2100           
2300-2400
 Copper               6539       6700-6900           
8000-8200
 Nickel              17430      20000-21000        
23000-24000
 Zinc                 2160       2400-2500           
2700-2800
 Lead                 2300       2300-2400           
2600-2700
 Tin                 14750      15000-16000        
17000-18000
 (Reporting by Nick Trevethan; Editing by Clarence Ferandez)




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