Best commodities where you can invest in 2011
Over the past decade, commodities have evolved into a unique asset class that is difficult to ignore. The recent boom in the commodities markets has given rise to a new class of investors who bet singularly on price movements in commodities. Commodity prices tend to follow the cyclical pattern of underlying commodities which is why it is important to understand the demand-supply factors. ET helps you find out the best commodities where you can invest this year.
Precious Metals
GOLD: The bull-run in the yellow metal, which has emerged as an intrinsic part of the portfolio of investors after a global financial crisis in 2008 is expected to continue in 2011. The ongoing uncertainty on the global economic front and growing investment demand to hedge risks strengthen the case for higher gold prices. Gold has provided returns of 25% in 2010 in the wake of the sovereign crisis in Greece and Ireland. The trend is likely to continue, given the weak economic scenario in other countries in the region. Although the US economy is expected to recover in the later half of 2011, the US dollar is expected to remain weak until then which could support higher gold demand.
SILVER: Silver has outperformed most commodities in 2010. It is expected to keep pace in 2011 as well. Silver has a higher industrial usage compared to gold. It is used in dentistry, photography, electronic motherboards and pharmaceuticals. Silver reserves are fewer than gold and are depleting faster. Unlike gold, silver is not recycled because of its much lower value. In a way silver is like petroleum, once consumed, it’s gone forever. Many analysts anticipate the gradual return of a more robust economy in 2011. As manufacturing and production increase, the industrial demand for silver should go up as well. The increased demand and limited supply may help the price of silver per ounce grow faster than gold in 2011.
Base Metals
COPPER: Copper is expected to be the best performer among several other base metals due to a demandsupply mismatch. The launch of financial products with copper as the underlying, higher and weak dollar may lead to all-time high prices of copper in 2011. Copper inventories on the London Metal Exchange fell by 30% in 2010, marking a low since October 2009. According to the International Copper Study Group, there will be a deficit of 435,000 tonne in the metal in 2011. The introduction of an exchange-traded product with copper as the underlying will put added pressure on supply. All this indicates a boom time for copper.
ALUMINIUM: Aluminium has been trading in a tight range and is expected to remain in that range in 2011. While demand has improved, so has supply. But the price of the white metal could find support considering the rising risk appetite of commodity traders and a weaker US dollar. Gains, however, would also be capped due to increased supply. The downside risk for aluminium is limited since prices are already near the marginal cost of production in China due to the increased power tariff. The New Year can be the year of consolidation for aluminium with a slightly upward momentum.
Precious Metals
GOLD: The bull-run in the yellow metal, which has emerged as an intrinsic part of the portfolio of investors after a global financial crisis in 2008 is expected to continue in 2011. The ongoing uncertainty on the global economic front and growing investment demand to hedge risks strengthen the case for higher gold prices. Gold has provided returns of 25% in 2010 in the wake of the sovereign crisis in Greece and Ireland. The trend is likely to continue, given the weak economic scenario in other countries in the region. Although the US economy is expected to recover in the later half of 2011, the US dollar is expected to remain weak until then which could support higher gold demand.
SILVER: Silver has outperformed most commodities in 2010. It is expected to keep pace in 2011 as well. Silver has a higher industrial usage compared to gold. It is used in dentistry, photography, electronic motherboards and pharmaceuticals. Silver reserves are fewer than gold and are depleting faster. Unlike gold, silver is not recycled because of its much lower value. In a way silver is like petroleum, once consumed, it’s gone forever. Many analysts anticipate the gradual return of a more robust economy in 2011. As manufacturing and production increase, the industrial demand for silver should go up as well. The increased demand and limited supply may help the price of silver per ounce grow faster than gold in 2011.
Base Metals
COPPER: Copper is expected to be the best performer among several other base metals due to a demandsupply mismatch. The launch of financial products with copper as the underlying, higher and weak dollar may lead to all-time high prices of copper in 2011. Copper inventories on the London Metal Exchange fell by 30% in 2010, marking a low since October 2009. According to the International Copper Study Group, there will be a deficit of 435,000 tonne in the metal in 2011. The introduction of an exchange-traded product with copper as the underlying will put added pressure on supply. All this indicates a boom time for copper.
ALUMINIUM: Aluminium has been trading in a tight range and is expected to remain in that range in 2011. While demand has improved, so has supply. But the price of the white metal could find support considering the rising risk appetite of commodity traders and a weaker US dollar. Gains, however, would also be capped due to increased supply. The downside risk for aluminium is limited since prices are already near the marginal cost of production in China due to the increased power tariff. The New Year can be the year of consolidation for aluminium with a slightly upward momentum.
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