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Financial Times, 13/14 May 2006
The chairman of the London Metal Exchange warned investors to be wary of a bubble developing in commodity markets.
Donald Brydon, chairman of the world's largest exchange for base metals, said investors should be cautious of investing in commodities as they soar to record highs. "There is a danger that this is a bubble. There are a lot of new players in the market that need to be careful."
The warning comes from a veteran of the City and financial markets. Mr Brydon is chairman of Axa Investment Managers and former head of BZW Investment Management. He is deputy chairman of the Financial Services Practitioner Panel and chairman of the code committee of the Panel on Takeovers and Mergers.
Commodity prices saw striking gains this week with aluminium, copper, platinum and zinc reaching record highs while gold, silver, nickel, refined sugar and orange juice futures touched prices unseen in decades.
Oil prices also spent another week above Dollars 70 a barrel as geo-political tension over Iran's nuclear programme mounted.
Much of the run-up in prices has been driven by heavy buying from investors and speculators.
Analysts say the latest surge in metal prices has more to do with speculative activity than any significant change in the supply and demand of industrial metals.
Copper has risen 12 per cent this week, its second successive week of double-digit gains. It ended the week at about Dollars 8,500 a tonne on the LME, up about 95 per cent on the year to date.
Zinc, nickel and aluminium have also reached record highs this week, with zinc and nickel rising by more than 10 per cent this week. Such a sharp rise has triggered rumours of hedge funds, investment banks and other investors suffering large losses after betting on a fall in prices. One hedge fund Ospraie is understood to have been hit by losses on the ascent of copper.
The International Wrought Copper Council, an industry group for companies that make copper products, warned last month that its members were being hit by high prices, which it said were caused by speculators.
The chairman of the London Metal Exchange warned investors to be wary of a bubble developing in commodity markets.
Donald Brydon, chairman of the world's largest exchange for base metals, said investors should be cautious of investing in commodities as they soar to record highs. "There is a danger that this is a bubble. There are a lot of new players in the market that need to be careful."
The warning comes from a veteran of the City and financial markets. Mr Brydon is chairman of Axa Investment Managers and former head of BZW Investment Management. He is deputy chairman of the Financial Services Practitioner Panel and chairman of the code committee of the Panel on Takeovers and Mergers.
Commodity prices saw striking gains this week with aluminium, copper, platinum and zinc reaching record highs while gold, silver, nickel, refined sugar and orange juice futures touched prices unseen in decades.
Oil prices also spent another week above Dollars 70 a barrel as geo-political tension over Iran's nuclear programme mounted.
Much of the run-up in prices has been driven by heavy buying from investors and speculators.
Analysts say the latest surge in metal prices has more to do with speculative activity than any significant change in the supply and demand of industrial metals.
Copper has risen 12 per cent this week, its second successive week of double-digit gains. It ended the week at about Dollars 8,500 a tonne on the LME, up about 95 per cent on the year to date.
Zinc, nickel and aluminium have also reached record highs this week, with zinc and nickel rising by more than 10 per cent this week. Such a sharp rise has triggered rumours of hedge funds, investment banks and other investors suffering large losses after betting on a fall in prices. One hedge fund Ospraie is understood to have been hit by losses on the ascent of copper.
The International Wrought Copper Council, an industry group for companies that make copper products, warned last month that its members were being hit by high prices, which it said were caused by speculators.
