Gold to Gain on Central Banks, Corn to Advance, Hermes Says

Gold is poised to continue gaining on strong central bank buying. According to expert Colin O'Shea of Hermes Investment Management, gold will perform a lot better than other assets out there if there is a fallout from what's happening in Europe or with the US budget supercommittee.

By Maria Kolesnikova
Nov 22, 2011 8:21 AM MT
Bloomberg

Gold will continue to gain on “strong central bank buying,” while soybeans and corn are poised to advance on tight supply, according to Hermes Investment Management, which has about $2 billion invested in raw materials.

“Gold is something we certainly like,” Colin O’Shea, head of commodities at Hermes Investment Management, said in a telephone interview yesterday. “It will perform a lot better than some of the other asset classes in the commodities complex if there is a fallout from what’s happening in Europe, or what’s happening with the U.S. budget supercommittee.”

Gold, up 19 percent this year, climbed to a record $1,921.15 an ounce in London on Sept. 6 and is heading for an 11th consecutive annual increase amid concerns about Europe’s debt crisis and slowing economic growth. Central bank gold demand for 2011 may be the most since at least 1970, the World Gold Council said Nov. 17. Central banks may buy 450 metric tons this year, signaling about 100 tons may be bought in the fourth quarter, the council estimated.

Soybeans may gain to as much as $12.50 a bushel, while corn may rally to $7 a bushel in January, O’Shea said.

“We had quite a falloff in corn and beans in the past weeks,” he said. “We feel that this presents opportunities. You can certainly see soybeans going above $12, and potentially to $12.50.”

Soybeans

Soybeans for delivery in January gained 0.2 percent to $11.4975 a bushel on the Chicago Board of Trade by 3 p.m. London time. The most active contract has declined 20 percent from this year’s high of $14.65 on Aug. 31. Corn for March delivery was little-changed at $6.0475 a bushel, down 24 percent from $7.93 a bushel on June 9.

“We view stocks-to-use as very low, we still believe that the U.S. Department of Agriculture will probably revise downward their yield in the January report,” O’Shea said. “We feel that whenever prices get down to the $6 area in corn, that we get strong exports and strong import requirements from countries like China.”

Corn imports by China were 304,405 tons in October, compared with 181,215 tons in September and 252,000 tons in October last year, the customs data showed yesterday. The U.S. corn crop, the world’s largest, at 12.31 billion bushels will be 1 percent smaller than forecast last month after unusually hot, dry weather in July and freezing temperatures in September reduced yields, the USDA said Nov. 9. Yields will drop to 146.7 bushels per acre from 152.8 last year, it said.

Soybean imports by China, the largest buyer, may surge to as much as 60 million tons as rising demand for feed widens the nation’s supply deficit, Standard Chartered Bank said. The USDA forecasts China’s imports at 56.5 million tons.

To contact the reporter on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

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