He’s considered one of the finest minds in the commodities space, calling the $147.27/bbl record level for crude oil almost to the dot, last year. He is now of the view that crude oil prices will break through $100/bbl as we approach 2011 and that gold will cross $1,500/ounce by the first half of 2011. Francisco Blanch, head of Global Commodity Research at Bank of America-Merrill Lynch spoke to ET Now on the outlook for commodities, the weakening dollar and why food prices are going to continue to rise sharply. Excerpts: Everything happening in commodities hinges on the dollar. Do you believe it is going to weaken from current levels? As a house we believe strongly that the dollar will weaken against the RMB Yuan, the Chinese currency but we also believe that the dollar will strengthen against the Euro as we believe that we are getting very close to the limits of US dollar strength at around dollar 50, which is where we stand today, so this is a bit of a mixed bag I think that the position of the dollar is almost complete and where we are entering now is a phase where all currencies will be like the base against gold. Sure but you have had a number of economists globally come out saying that dollar at some level is going to bounce back and when that bounce back does happen, it is going to be somewhere in the region of 15-20%, so if we do ever see something like that happen, can we expect some sort of carnage in the commodities market? Well, look, first of all the dollar if it strengthens 15-20%, it will strengthen mostly against the Euro. You will not see that kind of strengthening against the emerging market economies, which still have for the most part in our opinion undervalued currencies. It is true for the Mexican Peso, true for the Korean Won, true for the Chinese Yuan. We also believe the Russian Ruble and the rupee will strengthen against the US dollar, so we believe that the strength of any recovery in the dollar will be against some G10 currencies and that's in my opinion should not be driving commodity prices a lot lower rather commodity prices will get stability from the strength of the emerging market's currencies against the US dollar. Sure, so you do not believe a jump in the US dollar is going to have any significant impact on commodity prices? Again by a jump, of course if there is a jump across the board, if the dollar appreciates against the emerging market currencies and developed market currencies, yes, then we could see a pullback in commodity prices in the light of that but that's not our base case scenario. Now commodities we have seen have had a dream run over the last many months and we have seen billions of dollars flow into commodities but what have you been noticing? Where is the maximum amount of money flowing in and by your estimates, roughly how much money will have flowed into commodities by the end of this year? Well, it is always hard to estimate but we think roughly we are looking around 200 billion dollars flowing into the commodity sector, into what we call commodity indices and portfolio commodity exposure. There is also going to be obviously a lot more money flowing into commodities through debt instruments or through equity instruments and also to be fair, through direct ownership of physical commodities and purchase of real assets. The number there is a lot bigger, so I do not really have an estimate for that but certainly we are seeing more money coming in as investors are concerned about the real value of currencies. Commodities become a defensive real asset in that context.

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