Jitters continued to prevail throughout the week leading up to the 20th February, when finance ministers in the European Union met in the hope of approving a EUR130 billion (US$172.3 billion) bailout for Greece.
However, despite the nervous atmosphere stock markets still rose on the optimism that troubled Greece would receive its second crucial bailout package. This was coupled with China’s 50 basis-point cut to banks’ reserve requirement ratio, announced on the 18th February.
Despite the equity markets showing a positive performance, as seen in the Eurekahedge table for monthly returns in January, commodity funds seem to demonstrate better prospects than the other asset classes, making up half of the Top 10 funds.
This was illustrated in a recent report revealing that copper prices surged over 2% and oil prices increased over US$1.50 on the back of China’s easing policy, which was seen as positive by investors concerned about the demand outlook of the country.
Once regarded as the less attractive cousin to gold, silver has become a metal to be reckoned with. In January, silver increased its value by 21.05%.
The other metal making a strong comeback is platinum. Currently priced at US$1,648 per ounce, platinum’s lackluster performance in 2011 was caused by a weak demand from the Eurozone and especially Japan — one of the two biggest platinum markets, particularly for the auto catalyst sector.
South Africa, which houses the world’s largest platinum mines, is anticipated to be unable to meet the world’s demand due to ongoing strikes at the Impala Platinum mine as well as power shortages.
However, some analysts predict the surge in price to fizzle out in the coming months with the ongoing Eurozone debt crisis lowering demand for platinum.
Gold reached unprecedent highs last year having increased US$337.60 for its one-year performance, an increase of 24.32%. However, the price has eased after investors began selling off and profit-taking. Absa Capital’s Shariah compliant New Gold ETF has provided a one-year return of 33.89%. As uncertainty in global markets continues to linger, gold is predicted to have a bullish outlook this year as well.
Commodity funds and ETFs are dominating the funds industry, both conventional and Islamic. If the uptrend persists, they will represent a valuable alternative asset class to the Islamic investor, offering favorable returns albeit at a higher risk. — RW