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Monday, March 24, 2008

Commodities ... Up or Down?

Here are some views from around the world that I find interesting ...

There are 361 commodity funds with $98 billion in assets as of Feb. 28, compared with 345 funds with $80 billion at the end of 2007, James Proudlock, commodity product head for Europe, Middle East and Asia at JPMorgan Securities Ltd., said at a sugar conference in Geneva.

XX In other words, while hedge funds may be rushing for the exits, ordinary investors are thronging in.

The correction in commodities is actually a sign of how profitable they’ve been lately. The trend actually is a fallout of the crash in equity markets. Funds are booking their profits in commodities so that they will have the necessary liquidity and can overcome any loss in equities, of which there are many (“hello, Bear Stearns!”)

The IMF warns against any expectation of a large decline in commodities prices, cautioning that markets remained tight and demand in countries such as China, India or Brazil was strong.

Volatile downdrafts lasting for a few days have been a common occurrence during the rise in commodity prices over the past two years, Barclays Capital (BARC) noted in a report after markets closed on Mar. 20. "There has been little change in underlying fundamentals, which on the whole remain very positive for a wide range of different commodities and even after recent declines the prices of most commodities are still a long way above month-ago levels," the firm wrote.

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