Morgan Stanley Defies JP Morgan Short Position
(Reuters) Wed Nov 30, 2011 1:30am EST – Morgan Stanley defies JP Morgan short position and said it prefers exposure to gold, silver and livestock in the coming year, as such commodities perform well in a global economic slowdown.
The bank’s economists expect global GDP to grow by a mere 3.5 percent in 2012, down from its prior forecast of 3.8 percent, with the first half of the year seen as particularly weak.
“Given the low growth environment, we do not feel it is prudent to be long on the commodity complex indiscriminately,” analysts Hussein Allidina and Peter Richardson said in a research note dated Tuesday, November 29.
Gold, silver and livestock are the most preferred commodities while base metals and crude oil are the least, the bank noted.
The defensive nature of gold, and silver to a lesser degree, will create significant investment demand as investors look for safe havens in a period of risk aversion.
Base metals and soft commodities are highly cyclical and tend to sell off sharply during global slowdowns. Energy tends to be at the greatest risk going into a recession, as its demand is highly dependent on GDP growth.
The bank expects Brent crude prices to fall in the first half of 2012 to as low as $85-$90 per barrel, as it sees the current tight fundamentals diminishing as 2012 starts given recovering supply and slowing demand.
All Things Considered – John’s Commentary
Gold will continue to be the asset class with the greatest upside potential (and downside protection) in 2012. Gold is already up 26% for 2011 year-to-date, making it the best performing asset class.
Although there will global economic softness next year, industrial demand for silver will likely be down. Investment demand is projected to be up sharply which will lead to much higher silver prices. $60 silver by the end of 2012 is not at all unreasonable.
Action to take: I would be a buyer of silver without hesitation at any level below $36. I am continuing to accumulate personally. Your IRA is currently one of the best places to invest in physical silver. It is easy and inexpensive. Please contact us for more details.
Quote of the Day: “Gold is money. Everything else is credit.” – JP Morgan
