Baring upbeat about commodities

LONDON (Reuters) - Chinese industrialisation will attract a growing number of investors to place their money into the commodities sector via futures and indexes, Baring Asset Management said on Monday.

John Payne, manager of the Baring Global Resources Fund expects to see continued inflows of capital into commodities for some time ahead.

Payne said in a statement he was upbeat about the prospects for base and precious metals, but felt prospects for oil were slightly more mixed.

"What looks increasingly like synchronised global economic growth in the developed economies and China, has pushed base metals prices to unprecedented levels," Payne said. "We expect demand to continue to exceed supply this year and next."

The fund manager said the price of gold could easily exceed $600 an ounce during the first half of 2006, citing rising geopolitical tensions, strong fundamental demand and potential buying from central banks as supportive factors.

Spot gold was quoted at $555.75/556.50 a troy ounce by 11 a.m. versus New York's late Friday trade of $558.60/559.50.

"Baring Asset Management is sanguine on the oil price, feeling very confident that prices will not fall below $50 per barrel in 2006 and expecting $70 to $72 to act as the effective upper level," Payne said.

Oil prices eased 90 cents to $62.01 a barrel by 11:02 a.m., after surging late last week on al Qaeda's foiled assault on a huge Saudi oil facility.

Baring said while rising inventories could pressure prices as winter turns to spring, it also pointed out that refineries in the northern hemisphere were approaching the time of year when they traditionally engage in maintenance.

"So any unexpected increase in demand could result in a sharp upwards move in the oil prices, as could unforeseen geopolitical developments or significant interruptions to the oil supply."

There is still room for investing in commodities given the present global conditions.

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