PR: Gold and silver prices fall as commodities end January 'modestly higher'
Experts have reported that global commodity markets ended January only "modestly higher" as physical asset prices reacted to higher than anticipated inflation in China and other developing countries.
The Credit Suisse Total Commodity Return Strategy group noted that the Dow Jones-UBS Commodity Index Total Return rose 1.00% in January. Overall, 13 of the 19 index constituents increased in value. The Precious Metals sector, 2010's best performing sector, was the only sector to fall in January, decreasing 7.12%. Gold and silver prices declined as the demand for precious metals fell amid renewed economic growth prospects and a decrease in risk aversion.
Agriculture continued its positive performance in January, rising 3.93%, as each commodity in the sector barring Soybean Oil posted monthly gains. The sector has generally been supported by tight inventory levels due to continued strong demand and various supply shocks in key producing markets.
Nelson Louie, global head of commodities at Credit Suisse Asset Management said: "Developed and emerging countries are handling monetary policy much differently, which may instigate higher-than-expected inflation over time. In the US, the Federal Reserve continues to favour a loose monetary policy in an effort to stoke economic growth and job creation."
He added: "While in China, Central Bank officials raised bank reserve requirements once again in an attempt to curb inflation and keep economic growth from becoming destabilising. Through the actions of central bankers around the world, inflation, which has been running high in China and other emerging economies, may eventually surface in developed countries as well."
According to Credit Suisse Asset Management, supportive fundamentals, combined with an improving macroeconomic landscape, may continue to support appreciating commodities prices.
Christopher Burton, senior portfolio manager for the Credit Suisse Total Commodity Return Strategy pointed out that current global macroeconomic conditions continue to generally support commodity price levels: "Investor confidence in the Euro zone increased following successful bond auctions and support from key nations outside of Europe, while political uncertainty in Egypt and the Middle East rapidly escalated, driving commodity prices higher as January concluded. Improving investor sentiment in developed regions coupled with geopolitical unrest in some emerging markets may provide a favourable backdrop for commodities performance," Burton said.
