Commodities Outlook Is Mixed For Rest Of 2012; Precious Metals, Energy May Rise – Deutsche Bank

(Kitco News) - Commodity markets are weaker on the back of financial instability in Europe and a slowing economy in China, but looking toward the rest of 2012, precious metals and energy markets may be two of the few bright spots for the sector, according to a Deutsche Bank research report released Monday.

Even with the risk of a higher U.S. dollar, central bank gold buying, negative real interest rates and the possibility of further central bank stimulus should support gold’s price, the bank said. Oil market fundamentals could tighten over the next 12 months and considering global economic growth will remain above 3% this year and next year, any fall in oil prices will be short-lived.

“Historically it has only been when global growth has fallen below 2.5% that downward pressure on the oil price has been almost impossible to arrest by OPEC production cuts, at least over a 6-12 month horizon,” Deutsche Bank said.

Agricultural prices will likely be under pressure over the summer because of rising supplies across a number of markets, the bank said.
Industrial metals could see prices rise on an eventual rebound in Chinese gross domestic product, easing credit and a pickup in public sector housing construction. “However, the pace of these measures may be slow to materialize,” they said.