Oil, platinum and gold may rally as the global economy withstands the “headwinds” of higher interest rates, Europe’s sovereign-debt turmoil and Japan’s nuclear crisis, according to Threadneedle Asset Management Ltd.
Threadneedle is bullish on oil and platinum as demand climbs, while gold may advance to a record $1,800 an ounce, manager David Donora said in an e-mail interview. The London-based hedge fund targets its $149 million main commodity fund to beat the Dow Jones-UBS Commodity Index by 6 percent in 2011.
Citigroup Inc. said this week industrial metals have “limited upside” while silver may fall as central banks curb inflation. Goldman Sachs Group Inc. has ended a call to buy raw materials including oil in the near term, while forecasting gains over the next 12 months. Gold reached a record today.
“We see short-term headwinds as the market digests higher prices, tightening in emerging-market countries takes effect, and the market adjusts to the tragedy in Japan,” Donora said. “We believe the recovery will continue and that demand for commodities will accelerate into the end of the year.”
Group-of-20 finance chiefs said last week the world economy is strengthening, citing “increasingly robust” demand growth even as Japan rebuilds from last month’s record quake and nuclear disaster and Europe battles a debt crisis. China, the world’s largest metals user, grew at a faster-than-estimated 9.7 percent in the first quarter, according to government figures.
Investors have more than doubled their bets on higher prices for commodities traded in the U.S., according to government figures. The Dow Jones-UBS Commodity Index has gained 5.2 percent this year and touched the highest level since 2008 on April 8, led by gains in silver and cotton.
Threadneedle Asset Management, founded in 1994, oversees total assets of $97 billion. The main commodity fund, which is managed by Donora and invests in energy, metals and agricultural futures as well as equities of producers, posted a year-to-date return of 9.2 percent, data compiled by Bloomberg showed.
Donora added gold to his list of this year’s best bets as investors seek to preserve their wealth against rising inflation and weaker currencies. The dollar lost 5.4 percent against a basket of currencies this year.
“One would expect gold to be the safe-haven currency of choice,” Donora said on April 18. Immediate-delivery gold, which has gained every year since 2001, touched an all-time high of $1,502.32 an ounce today.
Threadneedle is also “consistently bullish” on oil and platinum as they face supply constraints and increased demand, Donora said, without giving forecasts. Crude in New York has soared 31 percent in the past year to $109.13 a barrel as unrest in the Middle East hurt supply, while platinum rose 4.3 percent to $1,788.75 an ounce.
The global campaign to fight inflation won’t curb demand for commodities, Donora said. Central banks across the globe, including the European Central Bank, have raised interest rates to counter rising prices and China has taken other steps, such as selling oilseeds at a discount to market prices.
“Any efforts to subsidize commodity prices to soften inflation are likely to offset the rationing effect of higher prices,” he said. “This leads to higher prices ultimately.”
Corn more than doubled in the past year, wheat surged 66 percent and soybeans rose 37 percent. World Bank President Robert Zoellick said on April 16 that the global economy is “one shock away” from a crisis in food supplies.
Still, Donora did not expect a return of the food crisis that was seen in 2008 as he has “a lot of confidence in the North American farmer.” The U.S. is the world’s largest exporter of wheat, corn and soybeans.