Commodity investors see volatility in early 2011 Go compare with our comparison table

Commodity investors see volatility in early 2011

23 May 2011 / by Paul Dicken

The fall in the price of silver after a heady climb from last year to April 2011 was for many a reminder of the volatility of commodities and natural resources.

Silver was probably the most pronounced but other precious metals and commodities have seen a fall in their price.

In the first quarter of 2010 gold, after a booming 2010, took a hit and earlier this month the price of oil fell back. For many investors, in the case of gold and oil, the fundamental case for investing remains in place. On 13 May, volatility in the commodities market was described as ‘froth’ by the chief executive of newly listed commodities trader Glencore, according to Reuters.


While gold fell back earlier this year, investors have since returned to the asset, attributed to safe haven stories, partly affected by concerns over government debt in Europe.

In the latest monthly report on the BlackRock Gold and General Fund, fund manager Evy Hambro said: “High levels of inflation in Asia and Europe coupled with concerns over on-going issues in the Middle East and North Africa are sustaining a supportive macro economic backdrop for gold.

“Despite likely near term interest rate rises for Eurozone countries, real interest rates look set to remain negative for the foreseeable future – this is usually supportive of gold and silver.”

The fund invests in companies involved in the gold market, such as mining firms, rather than the precious metal itself. This means it is less exposed to direct movements in gold price; although, the price of gold has a knock-on affect on the fortunes of the companies the fund holds.

Hambro told CNBC Europe in April that production constraints were positive for the value of many commodities over the longer term with a ‘tightness’ in the market seen in spikes in prices of some resources hit by seasonal effects.

He said he also expected large cash balances held by some firms to lead to merger and acquisitions activity in the sector.

Natural resources

The political unrest in North Africa and the Middle East and the earthquake in Japan in March were factors affecting the recent performance of the JP Morgan Natural Resources Fund, which underperformed its benchmark – the HSBC Gold, Mining and Energy Index – in the first quarter of 2010.

In its latest fund report the management team said the long term case – strong company cash flow and supply/demand – remained and supported investment in many commodities.

“We believe that the China growth story remains compelling in driving demand for commodities, despite investors’ short-term concerns about slowing growth,” the report said.

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Commodity Funds
Fund ManagerFundSectorFactsheetMore info
BlackRock Gold & GeneralSpecialistFactsheetMore Info >
This is a specialist unit trust which aims to achieve long term capital growth by investing in gold mining and precious metal-related shares. It tends to be volatile and is particularly suitable for diversification in a larger portfolio. See latest fund factsheet for details.
First State Global Resources Fund SpecialistFactsheetMore Info >
Aims to achieve capital growth by investing in the natural resources and energy sectors globally. Save 100% on initial fund charges.
JP Morgan Natural ResourcesSpecialistFactsheetMore Info >
The Fund aims to invest primarily in the shares of companies throughout the world engaged in the production and marketing of commodities. The fund aims to provide capital growth over the long term.See latest fund factsheet for details.
Fidelity Multi Asset Strategic Cautious ManagedFactsheetMore Info >
The Fund aims to provide moderate long-term capital growth by investing in a range of global assets providing exposure to bonds, equities, commodities, property and cash. See latest fund factsheet for details.
Multi Manager DiversityCautious Managed FactsheetMore Info >
The Fund aims to achieve long-term capital growth in excess of inflation through investment in a portfolio which gives exposure to a wide range of asset classes and geographic regions. See latest fund factsheet for details.

The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.