Found this today. Short the commodities, the anal-ysts say there in a bull, usually a good move to fade most anal-ysts IMHO!!!!!
Chris
NEW YORK (MarketWatch) - The prices of gold, crude oil and corn will soar to record highs during the second half of the year, boosted by global political tensions, oil-production worries and soaring demand for bio-fuels, according to commodities analysts speaking at a panel discussion in Chicago.
"A combination of growing industrial demand, supply constraints in some markets, and dollar weakness [are] all contributing to an upward price trend for many commodities," said Daniel Raab, managing director of AIG Financial Products Corp. in New York.
Raab was part of a panel of experts discussing the midyear commodities outlook at an event organized by Dow Jones Indexes and AIG Financial Products at the Chicago Board of Trade on Tuesday.
The Dow Jones-AIG Commodity Total Return Index has risen 7.81% so far this year. Investor interest in the commodity markets has also grown. An estimated $30 billion, twice the amount recorded a year ago, is tracking the Dow Jones-AIG Commodity Index on a global basis.
Gold prices will hit the $825-$850 range for the second half of 2006, propelled by violence and political uncertainty worldwide and particularly in the Middle East and North Korea, said Charles Nedoss, senior account manager at Peak Trading Group in Chicago.
"At times of political turmoil, gold does tend to outperform, and world tensions have been escalating to unprecedented levels," Nedoss said. "The risk premium ... in gold is going to increase as well."
Gold futures dropped almost $20 Tuesday on the New York Mercantile Exchange after rallying last week on the outbreak of fighting between Israel and Lebanon, which triggered safe-haven demand for the metal.
Also last week, deadly train bombings in Mumbai, India's financial center, and developments surrounding the nuclear ambitions of Iran and North Korea also boosted demand for gold. See metals sector.
In mid-May, gold soared to a 26-year high of $730 an ounce before selling off sharply. By mid-June, gold had bottomed just above $645.
New market players, particularly hedge funds and exchange-traded funds, have "brought a lot of volatility" on the gold market, which "creates a lot of trading opportunities," Nedoss said.
Increases in crude-oil prices also have had a positive effect on gold, Nedoss said.
"Crude is really one of the key drivers in price discovery for gold," he said.
Crude oil for August delivery was last trading unchanged at $75.30 a barrel on the New York Mercantile Exchange. See futures movers.
Crude prices will likely climb to $100 a barrel in the next 90 days, said John Kilduff, senior vice president and co-head of the energy-risk-management group at Fimat USA in New York.
Such a jump in prices might be triggered by a hurricane in the Gulf of Mexico or oil-production disruptions in Iran, Iraq, Nigeria, Saudi Arabia, and Venezuela, Kilduff said.
Oil has become "a barometer for world tensions," Kilduff said, and as a result, the oil market will be affected by developments in Israel, Lebanon and North Korea. Investors will also follow closely the Iranian nuclear situation - Iran is the world's fourth-biggest oil producer.
Crude-oil prices might pull back in 2007, possibly below $50 a barrel, if global tensions ease and the Federal Reserve contains inflation, Kilduff said.
Elsewhere on the commodity markets, the global "bio-fuel revolution," particularly the explosion in ethanol production, will drive demand for corn and soybeans, pushing prices upward, said Daniel Basse, president of research firm AGResource in Chicago.
"Bio-diesel demand is just astronomical," Basse said. "The corn market has to go to $4 or higher."
Corn for September delivery was last trading at 2451/2 cents a bushel, down 2.4%.
Basse said demand for corn ethanol in the U.S. will almost triple by 2012, while corn stocks globally are at their lowest levels since 1984.
Demand for bio-fuels is rising not only in the U.S. but also globally, particularly in China, Canada, the European Union, Brazil, and Indonesia, Basse said.
"This is going to have a tremendous dislocation on grain demand," Basse said. The world will need "record large global corn crops if we're going to keep up with the demand," while global wheat stocks will continue to decline, Basse said.
Ethanol, an alcohol-based alternative fuel produced from starch or sugar-based feedstocks, has been particularly hot this year as oil prices have skyrocketed, heightening concerns that the U.S. depends too much on imported oil. Ethanol is blended with gasoline to improve its emissions quality.
In 2005, 95 ethanol refineries in 19 states produced 4 billion gallons of ethanol, an increase of 17% from 2004 and 126% since 2001, according to the Renewable Fuels Association, the national trade association for the American ethanol industry. See archived story on ethanol.
