Gold, Silver Set to Beat Farm Commodities in 2011, Societe Generale Says


By Chanyaporn Chanjaroen – Nov 22, 2010 10:30 AM GMT+0100 LinkedIn More
Business Exchange Buzz up! Digg Print Email Palladium, gold and silver will extend their rallies next year and investors should remain overweight in precious metals, which will outperform farm products including sugar, according to Societe Generale SA.

Gold may gain 11 percent within a year, benefitting from central banks’ stimulus packages and expected dollar weakness, Frederic Lasserre, head of commodities research, said today at a media briefing. Palladium may rise 21 percent and silver may climb 19 percent, Lasserre said in Singapore.

Gold has surged to a record this month as investors seek alternatives to declining currencies and as concerns mount about the stability of some debt-laden economies. Ireland became the latest euro country to apply for a bailout from the European Union and International Monetary Fund at the weekend.

“We might see some gold-price rally again because of the recent fears regarding sovereign debt, and also the impact it may have on the dollar-euro,” Lasserre said. Corn and wheat will gain about 1 percent over the next 12 months, while raw sugar may drop 33 percent, according to bank forecasts, which projected changes from this quarter to the final quarter of 2011.

Spot gold, which traded at record $1,424.60 an ounce Nov. 9, has advanced 24 percent this year. Palladium, trading today at as high as $714 an ounce, has soared 75 percent, while silver has risen 64 percent and was at $27.8925 an ounce.

Bond Buying

The Federal Reserve pledged this month to spend an extra $600 billion buying Treasuries, adding to trillions of dollars injected by central banks worldwide to inflate their economies out of the worst global recession since World War II.

Gold may rise to $1,500 or $1,600 an ounce if the dollar falls to about $1.50 or $1.60 per euro, Lasserre said. The U.S. currency has lost about 4 percent against the euro this year and was at $1.3744 at 9:13 a.m. in London.

Societe Generale’s backing of gold and silver is matched by calls from rival banks. Precious metals will produce the best commodity returns in the next year, Goldman Sachs Group Inc. said in a Nov. 9 report, targeting $1,650 an ounce for gold.

Deutsche Bank AG Global Head of Commodities Research Michael Lewis has said that precious metals are some of the “safest long positions” to have. Still, Lewis also favored agricultural commodities including corn, soybeans and wheat.

Supply Shocks

“In agriculture there isn’t much upside potential,” said Lasserre, who’s led the bank’s commodities research team in Paris since 1997. That lack of potential is because there’s just been a huge rally, which can be explained by supply shocks, he said. Sugar may drop toward its long-term floor, he said.

Wheat surged to $8.68 a bushel in Chicago in August after drought ravaged Russia’s crop, prompting an export ban. Corn, trading at $5.435 a bushel today, has gained 31 percent this year. Sugar rose to 33.39 cents a pound on Nov. 11, the highest since 1981, on bad weather in major growers, including Brazil.

Oil may perform better than base metals and agriculture over the five years to 2015 as demand picks up, cutting a supply overhang, Lasserre said. West Texas Intermediate crude may gain 11 percent in a year and 45 percent over five years as a fuel- supply deficit develops, Lasserre said.

The January-delivery crude contract on the New York Mercantile Exchange was at $82.82 a barrel today. The price of the most-active contract has risen 4.4 percent this year.

Copper may rise 23 percent over the next 12 months and lead may gain 18 percent, according to the bank’s forecasts. Three- month copper on the London Metal Exchange touched a record $8,966 a metric ton on Nov. 11.

To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

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