London, 8 September 2009 

The Dow Jones-UBS Commodity Total Return Index is up 3.46% so far this year, as of September 4, 2008. Leading commodity analysts provided their market outlook for the remainder of 2009 and for the beginning of 2010 this morning at the fifth annual Dow Jones Indexes Commodity Outlook in London. 

Slight deficit for US gas market in the future

"When considering energy markets, investors tend to focus on oil prices in particular, leaving the U.S. gas market largely overlooked," said Jonathan Waghorn, co-portfolio manager, Investec Global Energy Fund, Investec Asset Management. "Yet in contrast to oil prices that have strengthened in 2009, U.S. gas prices have been under continued downward pressure as onshore over-production has been met with declining industrial demand. Although we forecast that industrial demand will be weak in 2009 and potentially 2010, we believe this bearish scenario is now reflected in both the commodity and equity prices of independent gas producers in the U.S., leading us to hold our view that natural gas is by far the cheapest source of energy in the U.S." Waghorn added: "There is a massive divergence in the gas price movements this year, with prices down as much as equivalent oil prices are up - the differential is rarely this marked. While we forecast over-supply in the U.S. gas market in 2009, investors should look past this and focus on 2010 and 2011 where the U.S. gas market could potentially be in a slight deficit in 2010, with this deficit widening further in 2011."

Monsoon in India reduced sugar crop size

"There is probably not a person in the world who does not know that the sugar market is on fire at the moment. If you pick up any newspaper you will read an article on sugar scorching to 28 year highs. Many thought the 2006 peak would take a while to be broken but it was blown out of the water and the market raced on northwards. The primary driver has been the disappointing monsoon in India, reducing the size of their 2009/2010 crop starting in October," said Joshua Dadd, trading analyst at ED&F Man. "This has triggered a surge of speculative money which amid limited selling has led to a sharp appreciation in prices. The irony is that there is no physical sugar deficit at the moment - just look at the New York and London sugar market front month switches and physical values but as usual the futures market is about anticipation, with the focus being on Q1 2010. What is for sure, 2010 should be a fascinating year for sugar, with a huge range in prices likely to be seen," he added.

High volatility of precious metals diminishes their attraction

John Reade, head of metals strategy at UBS Investment Bank argued "that in the long term, precious metals have a small place in a diversified portfolio. Over the past 36 years, returns have been reasonable and the lack of correlation to other asset classes is useful, but the high volatility of precious metals diminishes their attraction considerably. UBS's asset allocation team believes that a strategic allocation of only 1.1% is appropriate: for many, this is small enough to have been ignored. During periods of an increasing equity risk premium, U.S. dollar weakness, or rising U.S. policy rates or increasing inflation, the target asset allocation towards gold increases to anything between 8 and 100%. With inflation low and Fed funds effectively zero, at least two of these conditions look favorable for increased precious metals allocations. And if the dollar weakens in coming years, as UBS and other commentators expect, this could be another fillip for precious metals allocations. Any increase in investment into precious metals could drive the price of these metals much higher."

Strongest investor interest in gold, energy and agriculture

"Exchange traded commodity ETCs and ETFs have seen an extremely strong rebound in inflows following the market crash of last year. Total flows now stand well above their levels at the peak of the previous cycle in July 2008. Gold, energy and agriculture have seen the strongest investor interest, with industrial metals playing catch up more recently. With exchange traded commodities allowing investors to take short and leveraged positions as well as traditional long positions, flows into these securities can provide useful information to gauge investor sentiment. Recent flows indicate increasingly divergent investor views on the commodity outlook," said Nicholas Brooks, head of research and investment strategy, ETF Securities.

The Dow Jones-UBS Commodity Index is composed of 19 futures contracts on physical commodities and was introduced in 1999. The DJ-UBSCI family of indexes includes nine sector sub-indexes, multiple forward month indexes; sub-indexes for each individual commodity in the original DJ-UBSCI as well as for cocoa, lead, platinum and tin.

Also available are Euro-, Yen-, Swiss Franc-, and British Pound-denominated versions of the Dow Jones-UBS Commodity Index; Dow Jones-UBS Commodity Spot Index; and total return versions of each of the excess return indexes and sub-indexes.

As of the end of the second quarter of 2009, an estimated $36 billion tracked the DJ-UBSCI group of indexes.

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