Commodity markets enjoyed an extraordinary record breaking week with new price peaks being achieved in energy, precious metals and agricultural products.
Investor inflows into commodity markets appear to be gathering pace. Standard & Poor’s expects assets benchmarked to the S&P GSCI commodity index to increase by more than 20 per cent this year from an estimated $80bn to $85bn at the end of 2007.
Exchange traded products, one of the fastest-growing sectors for commodity investments, saw a strong start to 2008 with net inflows of $3.4bn in January, more than three times the monthly average for 2007, according to Barclays Capital. Barclays estimates total assets under management in commodity ETPs have swollen to almost $40bn.
“There is a growing awareness that natural resources are getting scarce,†said Professor Lex Hoogduin of Robeco, the Dutch asset management group: “The combination of demographic trends and rising global welfare will result in rapid growth in the consumption of commodities, energy, food and water in the decades to come.â€
Oil hit a record $101.32 a barrel on Wednesday, staging a strong rally over the past two weeks from a low of $86.24 on February 7, as hedge funds put aside concerns over a possible US recession and significantly reduced their bets via short positions that prices would fall.
Nymex April West Texas Intermediate rose 77 cents to $99.00 a barrel yesterday, up 3.7 per cent this week while ICE April Brent gained $1.11 at $97.35 a barrel, up 2.9 per cent this week.
US petrol prices hit a record $2.6169 a gallon on Tuesday, helped by talk that physical players were tightening the market by sending gasoline cargoes from New York to Mexico where demand growth is stronger. Nymex March RBOB unleaded gasoline slipped 3 cents to $2.4916 a gallon yesterday, off 0.1 per cent this week.
Gold hit a record $953.60 a troy ounce on Thursday, helped by disapointing US inflation data and mounting concerns that the US economy could be heading for a period of stagflation. Gold eased 0.1 per cent to $943.20 a troy ounce yesterday, up 4.5 per cent this week .
Platinum slipped 0.1 per cent to $2,148 a troy ounce after hitting a record $2,192 in yesterday’s session, with a significant supply deficit expected this year due to production problems in South Africa. Over the week, platinum gained 4.8 per cent, helping tow palladium up 12 per cent to $498 a troy ounce.
“Insufficient power generating capacity in South Africa means the domestic mining industry is set for production growth constraints for the next 4 to 5 years with immediate repercussions for the prices of its key commodity outputs, platinum, ferro-chrome, gold and thermal coal†said Tama Willis of Deutsche Bank
Copyright The Financial Times Limited 2008
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