Gold, silver and corn will outperform other raw materials next year as a weaker dollar and rising investor demand bolster precious metals while supply curbs aid grains, Morgan Stanley said, listing top picks for 2013.
Silver will track gold, which is poised to gain on low real interest rates, buying by central banks and geopolitical uncertainty, analysts including Peter Richardson and Hussein Allidina wrote in a report today, reiterating an October call. Corn and soybeans should benefit from harvest delays in South America, they said. The bank is bearish on aluminum, sugar, nickel and uranium as supplies are set to outpace demand.
Commodities as tracked by the Standard & Poor’s GSCI Spot Index are down 0.4 percent this year, led by declines in coffee, cotton and sugar. The gauge almost doubled in the three years to 2011 as central banks and governments around the world took action to boost their economies hurt by the global financial crisis in 2008. Morgan Stanley joins Goldman Sachs Group Inc. in predicting the so-called super-cycle isn’t over.
“Higher prices in recent years have brought both a supply and demand response, bringing many to call for the end” of the super-cycle, they wrote. “We view this as too simplistic. Commodities are cyclical but the elasticity of supply and demand, as well as the length of the cycle, vary significantly.”
Gold may average $1,853 an ounce in 2013, while silver may be $35 an ounce, Morgan Stanley said. That compares with gold’s average of $1,668 so far this year and $31.1542 for silver. Soybeans may average $15.70 a bushel in 2012-2013, it said.
Goldman reiterated an overweight call on commodities, yesterday, forecasting prices will return 7 percent in 12 months, Jeffrey Currie, head of commodity research, wrote in a report. Citigroup Inc. believes the super-cycle has ended, according to Edward L. Morse, global head of commodities research, on Nov. 19.
“With commodity-supply constraints easing, Chinese growth slowing and producer-company returns normalizing,” it is tempting to say the super-cycle is over, Currie wrote. “Current developments are simply the next phase of a commodity-investment cycle that began in the late 1990s. We therefore view the current transition as a renaissance, rather than an end.”
Goldman, backing crude, corn and copper, expects gold to peak in 2013 on a recovery in the U.S. economy. In contrast, Morgan Stanley called for higher prices on low nominal and negative real interest rates, as well as risks in the Middle East and central-bank buying. So-called negative real interest rates describe savings rates that are lower than inflation.
Spot gold, up 8 percent in 2012, is rallying for a 12th year as central banks join investors buying bullion to diversify assets. South Korea, Brazil and Russia are among those adding to gold reserves this year. Holdings in exchange-traded products are at a record, data compiled by Bloomberg show.
Morgan Stanley expects higher corn and soybean prices on the potential for lower supplies from South America. Rains and flooding have impeded planting in Argentina, while dry weather in Brazil is threatening beans.
The bank is bearish on aluminum as an increase in production capacity exacerbates an oversupply. So-called financing transactions and long waiting times for delivery from London Metal Exchange warehouses are supporting output, the bank said. Aluminum may average $2,300 a ton in 2013, the bank said, compared with $2,049 a ton so far this year.
Global sugar supply may outpace demand on rising Brazilian crush volumes and stable Indian production, said Morgan Stanley, while China’s import demand may slow on high inventories and improved domestic output.
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