THE commodities boom is far from over, and an expected fall in the US dollar will lead to a rebound in prices, a leading economist has predicted.
ABN AMRO's Michael Knox told delegates at the Excellence in Mining and Exploration conference in Sydney yesterday that as the US heads into a recession, base metals would bounce.
Speculators have continued to predict doom for the commodities super cycle, following months of volatility in the sector.
"I hear people say the commodities boom is over and I find it difficult to believe that is so," Mr Knox said.
"The rally in the US dollar had put metals into deeply oversold conditions but as the US goes into a modest, yet generous recession, the US dollar will fall and commodities will go up, with base metals rising from the oversold conditions."
A softer dollar makes US dollar-priced commodities cheaper for holders of other currencies.
Commonwealth Bank commodities strategist David Moore said the price cycle of commodities would remain.
"Over the long run, the likelihood of growth demand will be such that the average level of prices will be higher than they were before the last boom started in 2006," Mr Moore said.
Mr Knox added that a known sign of further softening in the US economy was when a "bad series of unemployment figures gets worse".
"When that happens, there will be a significant counter-trend in the rally in the US dollar and it could fall as much as 20 per cent over the next few quarters," he said. He said gold was a good indicator of where the US dollar was headed. "Gold always moves first and tells us a lot where the US is going to go. Gold knows what the $US is worth, which is not much and it is getting less," he said.
The spot price of gold was higher yesterday afternoon trading at $US781.50 an ounce, up $US26.30 from Friday's local close of $US755.20 an ounce.
Mr Knox said copper was oversold and he had it listed as a buy, adding that aluminium, lead and nickel were all cheap and heavily oversold in the market.
He also said that zinc stocks had risen 30 per cent since last year but it was a small absolute increase and did not really affect the price. The economist added that while there was talk of a slowdown in China, it was not one that would have an impact on Australia's resources boom.
For the Excellence in Mining and Exploration Conference, go to www.theaustralian.com.au/business. Boardroom Radio