Agri and platinum: recession-proof commodities?

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London, Feb 5: A punt on gold has paid off handsomely for investors trying to avoid the turmoil in global financial markets over the last few months, but a commitment to agriculture or platinum might prove to be smarter.

Commodity markets were at the centre of a shopping spree at the start of this year as fund re-allocation money poured into all sorts of basic resources from gold to palm oil. But with the US economy teetering on the brink of recession, investment opportunities in commodities may shrink as concern grows over the length and breadth of any downturn.

Analysts say the key to a sound investment is finding something that can hold its value on more than a portfolio diversification basis -- for some, this is where agricultural commodities come into their own.

"Agricultural investments will now probably be the biggest area for commodity investments. There's ethanol, global warning, urbanisation in China, which all adds up to greater demand," said Chris Bouckley, a partner at UK-based fund manager Caliburn Capital Partners.

Grain had an impressive 2007, led by wheat and soybeans. Chicago futures prices for both gained more than 70 percent on low global stockpiles and robust demand partly due to exploding emerging market appetite and the biofuels revolution.

Speculators and longer-term investors have piled into grains as the fundamentals paint a compelling picture -- one that may endure despite financial market volatility.

"If people start losing confidence in the stock market I don't think that's going to translate into them eating less goods or agricultural products," said Gavin Maguire, analyst with Iowa Grain in Chicago.

The top pick for most within the agricultural sector is sugar, which has lagged the explosive rally that saw several other commodities hit record highs in January.

Prices are finding support after a near 8 percent loss last year. Analysts say the global market surplus is narrowing while demand for alternative fuel based on sugar cane is growing.

In precious metals, analysts are calling for a $1,000 bullion price, but with gold having hit $930 an ounce already the potential for further upside may be limited.

A power crisis in top global platinum producer South Africa has crippled some of the world's biggest mines and sent prices to record highs above $1,800 per ounce -- extending 37% gains made in 2007.