Precious Metals Likely to Outperform for Commodity Investors
Source: Mineweb, Pratima Desai (1/16/09)
"We like precious metals because we have ongoing concerns about paper assets and inflation further out."
Gold is on investors' buy lists, as they ready for a period of rampant inflation because of the large amounts of cash being pumped into the global financial system. Expectations that the dollar will resume its downtrend because of a ballooning U.S. government deficit will also boost gold's status as an alternative currency.
Spot gold is up nearly 20% at around $810 an ounce since October, when the financial crisis took a turn for the worse after U.S. bank Lehman Brothers collapsed.
"We like precious metals because we have ongoing concerns about paper assets and inflation further out," said Andrew Cole, director of asset allocation at Baring Asset Management.
With no end in sight to the financial crisis and the global economy deteriorating by the day, prices of industrial commodities, such as copper and natural gas, are expected to come under further selling pressure.
Copper used widely in power and construction is hovering around $3,300 a ton, down more than 60 percent since July's record high of $8,940 a ton. Natural gas has also fallen by a similar amount to below $5 a million British thermal units (mmbtu) since July.