BLBG: Commodities Demand Is ‘Trend to Stay,’ Barclays Says
By Claudia Carpenter
Nov. 6 (Bloomberg) -- Investor demand for commodities that helped drive gold to a record this week and copper and crude oil to one-year highs is “a trend to stay” as buyers diversify from stocks and bonds, according to Barclays Capital.
Commodity assets under management climbed a “robust” $2.2 billion last month, Barclays Capital said in a report two days ago. Hedge funds and other speculators increased their “net- long” positions, or bets on higher U.S. commodity futures prices, to the most since July 2008, government figures show.
“We have seen right through the year that investor interest in commodities remains strong, and we see this as a trend to stay,” London-based Barclays analyst Amrita Sen said in an e-mail today. “The allure of commodities as one of the best alternative asset classes remains intact.”
Gold climbed to a record $1,097.72 an ounce yesterday and crude oil and copper jumped to one-year highs last month. The S&P GSCI Index of 24 commodities rose 46 percent this year, rebounding from last year’s 43 percent drop after the worst global recession since World War II curbed raw-material demand.
The Standard & Poor’s 500 Index of stocks climbed 18 percent this year, after falling 38 percent last year. U.S. Treasuries lost 2.9 percent this year, according to Merrill Lynch & Co.’s U.S. Treasury Master index.
Added to Commodities
The $2.2 billion added to commodities in October was the lowest since July, according to Barclays. New investment in the Deutsche Bank PowerShares commodity products has also slowed since September, said Michael Lewis, head of commodities research at Deutsche Bank AG in London.
“I don’t think there is a structural change to the commodities story, certainly their popularity is still quite strong,” Lewis said. Assets may be slowing because of end-of- year trading strategies, he said. New investment “has slowed but it’s still positive.”
PowerShares has about $10 billion in commodities, up from $3.8 billion at the start of the year, Lewis said. They range from precious metals to agriculture and energy. Assets will probably end the year higher than $10 billion, he said.
Investments in commodities have climbed “despite regulatory concerns,” according to Sen of Barclays. CME Group Inc., the world’s largest futures market, told U.S. lawmakers and regulators last month that business was moving abroad because of potential trading limits being considered by the Commodity Futures Trading Commission.
A drop in the dollar against the euro by the end of the year, with Deutsche Bank forecasting $1.55 against the euro in December, may increase commodities demand by the end of the year, Lewis said. “I believe it’s going to be pretty big because of the dollar story we’ve got,” he said. The dollar was trading at $1.488 against the euro by 11:28 a.m. London time.
Some investors buy commodities to hedge against declines in the U.S. currency.
