3rd September 2012
Investors interested in commodities should look beyond current short-term concerns, such as the European debt crisis, and focus on the medium to longer term. Over the next 10 years and beyond, many experts predict that demand for commodities will continue to be led by the emerging markets as their development and lifestyles evolve and change, in addition to on-going supply issues within the commodities arena. There are opportunities out there for investors, although it currently seems no asset or sector can escape the problems and potentially escalating sovereign debt issues within the Eurozone.
Whether investors seek opportunities within the hard or soft arena of commodities, prices have shown over the past 12 months that these investments demonstrate the volatility of markets, supply and demand concerns and the impact global uncertainty can have on them. This has been displayed by the terrible bloodshed witnessed in South Africa, where the unrest led to the price of platinum rising given uncertainty and concern over supply issues.
And whilst gold touched a record high during 2011 at around $1880 an ounce, 2012 has generally seen the price falling back to around the $1600 mark. Gold has always been seen and perceived as a preservation of wealth and safety. And yet over the past year, as the global uncertainty and European Sovereign debt crisis has continued to escalate, the price has fallen back. Such behaviour in the price has surprised some experts and led others to suggest Gold is no longer a safe haven.
Let us not forget, a bar of gold now will always be a bar of gold in the future. The value of the asset will be whatever someone is prepared to pay. It provides no income and has a storage and insurance cost.
Investors have the opportunity to gain exposure to gold through a variety of investments, either directly or indirectly. Exposure via a fund means that your returns are not only reliant on demand for the asset but also the management of the mining company and the managing of the raw materials.
Given the exponential rise of ETFs over the past several years, there are many experts who have pointed the finger at these investments as a key reason why the price has become increasingly more volatile. However, holding an asset such as gold in a diversified portfolio does have its benefits.
US Shale Gas
Within the energy sector, the historic and traditional discussions around the price and volatility of oil continue. The emergence and development of the US shale gas fields continues. It is questioned what will be the preferred renewable energy source in years to come, given concerns and worries over nuclear?
The price of oil continually reflects the political and geographical tensions around the world, along with issues surrounding global supply and demand balances.
Demand for oil shows no sign of abating, despite clamours around the world to reduce emissions and develop more environmentally friendly forms of energy and transportation. Consumption of oil in 2011 was at record levels and many experts forecast 2012 to exceed the previous record levels of 90m barrels per day.
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