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The Dow Jones-UBS Commodity Total Return Index is up 6.94% so far this year, as of September 21, 2009. Leading commodity analysts provided their market outlook for the remainder of 2009 and for the beginning of 2010 this morning at the third annual Dow Jones Indexes Commodity Outlook in Paris.
Rising oil prices, though a threat to global recovery, could go higher "Given lax monetary conditions and massive capital inflows, oil prices are likely to move higher in the short run," said Benoît Cougnaud, president and financial risks management specialist, Azurris Risk Advantage. "The recent increase in oil prices might attract wider ranges of investors, feeding a further rise in crude oil prices. However, rising oil prices weigh on consumers and companies' margins. A rise in oil prices towards even more excessive levels could be quite counterproductive at a time when economic recovery plans are progressively coming to an end, with no prospect for sustained rebound in private consumption and investment," Cougnaud added. "Therefore, we think that the current recovery is too fragile to bear such disconnected and excessive oil prices."
Agricultural prices will stay above historical average despite economic uncertainties "The uncertainties with respect to the current economic crisis will certainly have an impact on prices of agricultural products, even though the sector proves to be relatively resilient. The downturn of rice, oilseed, wheat and corn prices started in 2007/2008 and will continue until mid 2010, when a slight recovery is anticipated. Despite last year's huge decline, agricultural prices are likely to stay above the historical averages for the decade to come," said Dr. Martin von Lampe, agricultural economist at the Organisation for Economic Co-operation and Development (OECD). "Furthermore, global grains production has shown a strong response to recent price signals and is expected to continue to grow, with 2018 output exceeding 2006-08 averages by some 20% for coarse grains and sugar, 30% for oilseeds and almost 45% for vegetable oils. Wheat demand, dominated by human food needs, and coarse grains demand, pushed by animal food and biofuel, are likely to continue rising in OECD and non OECD countries. However, higher oil prices and lower GDP might alter this picture and change price prospects for agricultural products globally," he added.
Involvement of China and Japan in the gold market will increase demand Jean-Philippe Roos, commodities analyst and fund managers, Natixis Asset Management, said that "gold is an indispensable asset for portfolio diversification. Gold is a counterweight to any downward movement of the dollar on currency markets and benefits from difficulties encountered by some large Western banks, such as a possible resurgence of inflation and the current geopolitical climate in Iran and Pakistan. Therefore gold plays the role of a safe haven in today's economic and financial crisis. Nevertheless, the growing involvement of Asia, especially China and Japan, in the gold and precious metals markets, also highly contributed to the increased gold demand and ensure the demand continues to grow in the future. These two new players on the gold market and the expected decline of several currencies speak for an investment in gold."
Gold, oil and agriculture attract strong investor interest "Investment flows in exchange traded commodities (ETCs) indicates that a large part of the investment this year has not been chasing momentum, but has been focused on "real assets" as a hedge against the risk of currency depreciation and inflation as governments see debt levels soar and central banks grow their balance sheets at an unprecedented pace," said Daniel Wills, senior analyst, at ETF Securities. "Gold has seen the largest and steadiest inflows, highlighting its status as a store of value, safe haven asset and insurance against a myriad of risks. Industrial metal flows picked up before the rise in prices this year. More recently, however, flows have turned negative and increased interest in the ETF Securities' short copper ETC product indicates a possible change in sentiment. Oil flows, after surging up until May when the oil price moved to US$70 per barrel, have turned decidedly negative over the past two months. Flows into short oil ETCs have also risen indicating some investors could be positioning for a correction," he added. "Strong flows into natural gas coincided with oil outflows indicating rotation within the sector. Agriculture ETC inflows have been strong and steady - with limited sensitivity to price - and focused on broader based ETCs indicating longer-term thematic investing is taking place."
The Dow Jones-UBS Commodity Index (DJ-UBSCI) is composed of 19 futures contracts on physical commodities and was introduced in 1999. The DJ-UBSCI family of indexes includes nine sector sub-indexes, multiple forward month indexes; sub-indexes for each individual commodity in the original DJ-UBSCI as well as for cocoa, lead, platinum and tin.
Also available are Euro-, Yen-, Swiss Franc-, and British Pound-denominated versions of the Dow Jones-UBS Commodity Index; Dow Jones-UBS Commodity Spot Index; and total return versions of each of the excess return indexes and sub-indexes.
As of the end of the second quarter of 2009, an estimated $36 billion tracked the DJ-UBSCI group of indexes.
