Column: Not all commodities glittered like gold

Written by Sanjeeb Mukherjee | Updated: Jan 1 2010, 02:04am hrs
The prices of most commodities are poised to end significantly lower in 2009 than their average prices in 2008. Even though signs of recovery in global markets, and the dollars continued weakness, have pushed up prices of major farm and non-farm commodities in the last three months, price levels for most commodities are nowhere near 2008 peaks.

The average price of crude oil has moved up from $68.35 per barrel in September to $77.55 a barrel in November, but the average for the first 11 months of 2009 is significantly lower than the 2008 full-year average crude price of $96.99 per barrel. The same story repeats in other dollar-denominated commodities like copper, aluminium, zinc, lead, tin and steel.

Gold, however, is expected to be the brightest non-farm commodity in 2009. The metal has averaged $958 per troy ounce in the first 11 months of 2009, up almost 10% from the 2008 full year average price of $872 per ounce. Since September, the average monthly price of the metal has risen from $997 per ounce to $1,127 per ounce.

Dollar price movements will be the predominant guiding factor for gold in 2010, with some experts predicting that the metal will top $1,250 per troy ounce in the first quarter of 2010. How accurate these predictions are will be one of the most fascinating things to watch out for in the commodities space next year.

In farm commodities, sugar has stood out as the most vibrant in 2009. Sugar prices broke all records on the back of low output in India, the worlds largest consumer, and falling yields in Brazil, the largest producer. In the first 11 months of 2009, sugar prices averaged 38.92 cents per kg in the international markets, almost 38% more than 2008. Though there has been some recent moderation in sugar prices because of the harvest in India, sugar prices will continue to remain high till a clear picture of the actual Brazilian crop emerges. Since September, sugar prices have dropped from around 50.84 cents per kg to 49.07 cents per kg. The average prices of all other major farm commodities like rice, wheat, palm oil, cotton and rubber will close 2009 at levels lower than those seen in 2008.