Credit Suisse bullish on commodities in 2010
* 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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