Standard Chartered Bank Forecasts Darker Days for Commodities

Source:

...But Head of Standard Charter Bank's Commodity Research Helen Henton pointed out that, in the longer term, the story of secular demand growth for commodities remained intact due to the development of key economies such as China and India...

Standard Chartered Bank (SCB) says the demand picture for commodities does not look supportive and it expects commodity prices to remain weak well into next year and subdued until the middle of 2009. However, secular demand growth for commodities remains intact in the longer term...

Head of SCB's Commodity Research Helen Henton said demand for commodities is already suffering, while the bank expected further weakness in demand. Commodity supply cutbacks would help in some cases, but overall there will still be downward pressure on prices.

"With GDP growth likely to remain weak well into next year, we expect prices to remain subdued until the middle of 2009. What we are seeing is a cyclical demand downturn," said Henton.

Henton added that the bank had been highlighting the risks of slower global demand for some time, but the deterioration has been accelerated by the financial crisis. But she pointed out that, in the longer term, the story of secular demand growth for commodities remained intact due to the development of key economies such as China and India...

Demand for platinum group metals (PGMs) was likely to weaken further, despite the fact that supply issues persist. This follows heavy falls in PGM prices with ongoing problems in the automotive sector adding to downward pressure.

In contrast, gold is likely to remain well-supported near term by safe haven flows and falling interest rates. However, once financial conditions stabilise, some of the safe-haven flows would disappear and together with US dollar strength, bring prices lower...

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