Upward trend seen in major commodity prices
By Hanim Adnan
PETALING JAYA: Prices of major commodities will continue to head north – at least in the first half this year – on strong global demand amidst tight supply, while they closely track the price of crude oil.
Yesterday, most major commodities closed on a higher note or near record levels following the overnight crude oil, which hit US$100 per barrel for the third time this year.
Gold on Nymex trade little changed at US$928.21 from its three-week high of US$930.50 a day earlier. Early this month, gold rose to a record US$936.92 an ounce on concerns that the US dollar would weaken further while investors are buying the precious metal as an alternative asset.
Platinum reached US$2,174 an ounce on Nymex, the highest ever before easing to US$2,153.10, while copper rose to a four-month high of US$3.74 a pound on the Comex division of Nymex.
Soybean on the overnight Chicago Board of Trade for May delivery reached a new record of US$14.28 per bushel. The commodity has increased about 85% over the past 12 months.
Wheat, which tracks soybean, also rose to US$10.47 per bushel on speculation that record soybean prices might encourage US farmers to switch to oilseeds from grain, when planting begins in May and June.
On the local front, crude palm oil (CPO) futures for May delivery eased RM1 to RM3,624 per tonne, tin remained unchanged at US$17,000 per tonne while tyre grade Standard Malaysian Rubber SMR 20 added 7 sen to RM8.72 per kg.
A trader told StarBiz that investors were looking at strong returns from food-based commodities, given the rising demand driven by China and India as well as anticipation of tightness in major crop production this year.
In addition, the higher crude oil price will trigger higher usage of wheat, sugar and palm oil as feedstock for biofuel production.
Aseambankers in its latest plantation report, however, cautioned investors of a potential price bubble, especially in the second half this year.
As predicted, the two interest rate cuts by the US Federal Reserve so far this year had weakened the dollar, which in turn pushed commodity prices higher.
Soybean rose 6.6% over the past one month while CPO rose 3.1% in US dollar terms.
“We caution that commodity prices will hit their peaks soon if the health of the US economy and global markets lead to a sell-down in the equities market. This can put off speculative buying in the commodity market,” the brokerage said.
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KLCI did went into red zone yesterday(21/02/080). Loss of 1.44% was a little steeper than I thought. Aseambankers cautioned potential price bubble...What's next? Ask the law of path of least resistance.
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