Transcripts

The Outlook for Commodities

PAUL KANGAS: The talk on Wall Street this week has been all about commodities. We've seen rallies in oil, gold, copper, and wheat, raising questions about what's next for these natural resources. Investors see them as a gauge of the health of the economy and as a way to diversify their portfolios. Scott Gurvey checked in with the experts on the outlook for commodities.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: When it comes to commodities, gold usually gets the headlines. But investment analyst Doug Groh says in the recent rally, everything is moving.

DOUG GROH, SR. ANALYST, TOCQUEVILLE ASSET MANAGEMENT: You are seeing not just gold move in this rally, but you're seeing interestingly lead, zinc, aluminum. Copper's been a strong player in this rally. So you're seeing it across the board.

GURVEY: Commodities are more than metals. They can be any hard asset. That means they have a value and use by themselves. They include livestock, grains and other agricultural products, raw industrial materials and oil, gas and other energy sources. With signs the recession is coming to an end, the closely watched CRB commodity index, which does not include energy, has been rising and most experts expect that trend to continue. Individual investors often use mutual funds and exchange traded funds to invest in commodities. But the experts warn there are vast differences from one fund to the next and investors must do their homework. Strategist Rebecca Patterson says investors must also consider their time frame when choosing commodity funds.

REBECCA PATTERSON, GLOBAL CURRENCY STRATEGIST, JP MORGAN PRIVATE BANK: In the short term with the global economy recovering, improving expectations for global demand is likely to lift all commodity prices at least to a degree. So a broad commodity basket probably will perform relatively well. But if you are an investor with any sort of longer term time horizon, you're probably better off getting a bit more specific.

GURVEY: Commodities are also used as an inflation hedge. Craig Peckham of Jefferies says he thinks that investor worries about inflation will continue to push commodity prices up.

CRAIG PECKHAM, EQUITY STRATEGIST, JEFFERIES & CO.: The rally is not so much predicated on a view that aggregate demand is going to be per se robust, but rather a phenomenon that's dictated by pressure on the value of currencies globally as an unfortunate consequence of all the money printing that's going on and a way to protect value is to sort of hide in hard asset plays.

GURVEY: Commodity prices are highly volatile. So while most financial analysts recommend we have some in our portfolios, they suggest we keep it to 5 to 10 percent. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.