Commodities still long-term bet for investors

Wednesday 30th March 2011
As rising inflation causes concern for savers, commodities and natural resources have been gaining attention as an attractive option for equity investors.

Investment companies in this sector have historically enjoyed strong performance.

However, investors may be wondering whether this commodities "boom" will be followed by an inevitable "bust", as conflict in the Middle East and recent events in Japan introduce uncertainty into the sector.

The Association of Investment Companies has collated the views of two commodities focused investment companies.

The managers believe that recent events in Japan, along with market uncertainties arising from the Middle East, should support growth within the commodities sector.

Will Smith, Manager of City Natural Resources and Portfolio Manager of Geiger Counter said: "The tragic events over the past few weeks in Japan will create a renewed focus on energy policy and which sources of energy will indeed provide base load capacity long-term.

"We continue to favour gold whilst loose monetary policy continues; palm oil, as a play on rising incomes in Asia; and copper for its particular supply/demand dynamic."

Evy Hambro, Manager of BlackRock World Mining Trust agrees but prefers to take a wider view: "In terms of recent geopolitical factors and natural disasters, it's important to maintain a broad macro view when looking at the markets. However, these recent events are likely to have a positive impact across the commodities spectrum, as nuclear power plants will need to be rebuilt and investors traditionally turn to gold during periods of uncertainty and instability as a way of preserving wealth."

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Mike Jones