Head for precious metals in 2008 – MoneyWeek

Basemetalshavecomeunderpressureoflateamidworriesovertheglobaleconomy,andhenceconsumption。

Copperhaslost23%sinceearlyOctoberandleadis42%offitshighs。

Butlong-termfuturescontractshavecontinuedtorise,withfive-yearforwardcopperandaluminiumpricesrecentlyeclipsingrecordpeaks。

Thatmeansmarketsare“lookingpasttheshortterm”andfactoringinanenvironmentinwhichproducersstruggletokeepupwithdemand,saysBarclaysCapital。

Long-term,metals’prospectsremainpositive。

MorganStanleyalsosuggeststhatthesupercycleisfarfromdead:anydeclineindemandamidanAmericanrecessionislikelytoprovecyclicalandshort-lived,whilesupply-sideconstraints“arelargelystructural,foreshadowinghighercommoditypricesinthelongrun”。

Buttheextentofthedownswingisunclear,withBarclaysCapitalnotingthatmetalsconsumptionshouldremainproppedupbyemergingmarkets,provided“globalgrowthassumptionsremainrelativelyfirm”。

Giventhemurkynear-termoutlook,metalslookfarlessappealingnextyearthanagriculturalcommoditiesandpreciousmetals。

Gold’sfundamentalslookencouraging,withminedsupplystagnantandbothjewelleryandinvestmentdemandontherise;withthedollarweakandthecreditcrisisfarfromover,themedium-termtrendisup,saysBarclaysCapital,whichexpectsgoldtoaverage$830anouncenextyear。

Silvershouldalsobenefitfrominvestorsseekingasafehaven,whileRBCCapitalmarketssaysglobaldemandlookslikelytokeepoutpacingnewsupply。

Anddon’tforgetplatinum,saysBarclaysCapital’sPaulHorsnell。

Withinventoriesfallingtorecordlowsandthemarketindeficit,investorandphysicaldemandshouldunderpinnewhighsnextyear。

NakedTextNakedText