Morgan Stanley looks for gold to average $1,853 an ounce next year and for silver to average $35. The platinum forecast is $1,715. “We favor commodities with structural stories or these facing supply constraints,”
Commodities are cyclical, however the elasticity of supply and demand, as well as the length of the cycle, varies considerably across the complex, the firm stated. “Investors should be more selective, but possibilities abound. With international demand uncertain, supply-side fundamentals, demand elasticity and idiosyncratic dangers will prove increasingly essential in driving price action. Using this lens, we favor exposure to gold, silver and corn/soybeans. We're modestly constructive crude oil into 2013, but more so in the second half.”
Morgan Stanley stated gold is its “preferred basic metal exposure heading into 2013.” The third round of quantitative easing in the U.S. and European Central Bank’s unlimited bond-purchase plan would be the most significant elements to get a continuing weak trend in the U.S. dollar, and in turn a important for more powerful gold prices in the short term, Morgan Stanley stated.
“However, low nominal and unfavorable real interest rates, ongoing geopolitical danger in the Middle East and continued mine supply problems may also be supportive,”
Morgan Stanley stated silver is really a “cheap proxy to gold” and stated it looks for the metal to outperform gold in 2013. Supply-side constraints provide possible support for platinum group metals, Morgan Stanley stated, adding that it views supply/demand fundamentals as better for palladium than platinum.
“We have a more optimistic outlook for platinum group metals, as supply problems in South Africa have helped get rid of surpluses in all significant PGM markets,” analysts stated in their report. “We anticipate deficit markets to continue in 2013, with upside benefits for prices. Industrial demand remains firm, and supply is constrained by South African labor problems, decreased sales from Russian stocks and lower recycling rates.”
At the same time, Morgan Stanley analysts described themselves as “relatively cautious” on base metals due to a “guarded view” of first-half international financial development and also the complex’s powerful correlation to international macroeconomic trends.
“The downside dangers to pricing are only magnified by a structural oversupply evident in most base metals markets, using the important exception of copper and maybe lead,” Morgan Stanley stated. “Upside for next year might be discovered in 2013 as our international economists are forecasting a pick-up in industrial activity.” Morgan Stanley stated copper is “our sole choose in this complex,” forecasting an average price of $8,600 a metric ton. While supply is expected to develop, international inventories are beginning from a low base. “We are becoming increasingly positive on the outlook for copper’s important end-use sectors in 2013, particularly in China,” Morgan Stanley stated. The firm stated the aluminum marketplace is “oversupplied and over-produced,”