Morgan Stanley boosted its 2011 price forecasts for gold and copper, and recommended equities including Xstrata Plc and Kazakhmys Plc, because of expected supply constraints and a weak dollar.
“Accelerating weakness in the U.S. currency, driven by fears of renewed quantitative easing to confront sluggish U.S. growth, is proving to be a boon to commodity markets,” Morgan Stanley metals and mining analysts led by Peter Richardson said. Gains will be supported by “resilient growth in emerging markets,” they said.
Gold prices are expected to average $1,315 an ounce, 14 percent higher than Morgan Stanley’s previous forecast, and copper $3.80 a pound, up 10 percent. Iron-ore prices are set to trade next year at $135 a ton, unchanged on the bank’s previous forecast, and up from an average $122 a ton for this year.
“Despite some persistent market concerns about the strength of demand for steel-making raw materials in 2011-12, and fears regarding the growth in new capacity over this timeframe, especially in iron ore, our fundamental analysis highlights continued strength in premium products,” Morgan Stanley said.
Seaborne markets will struggle to provide sufficient supply to match anticipated growth in steel production, at least until 2012, it said.
Other companies Morgan Stanley favored were Kobe Steel Ltd., Impala Platinum Holdings Ltd., Tata Steel Ltd., Posco and Fortescue Metals Group Ltd.