NEW YORK, Feb. 15 (Xinhua) -- Commodity prices recently hit hard by the outbreak of novel coronavirus are becoming attractive for investment but some price volatility would continue in the coming weeks, according to a research note by Swiss investment bank UBS AG issued on Friday.
Though the price correction of crude oil and base metals should not be surprising given the Chinese heavyweight status in global consumption, the price weakness in grains and livestock indexes overstated the demand impact from the coronavirus named as COVID-19, said UBS.
"This sharp price correction offers investors an opportunity to engage in yield enhancement strategies with crude oil, nickel or lead," UBS said, assuming that Chinese economic activity as well as commodity demand would recover from the second quarter of 2020 onwards.
The expected new production cut by the Organization of the Petroleum Exporting Countries and its partners would also guard against further weakness of crude oil prices, according to UBS.
Gold would remain an attractive diversifier within a portfolio context and the expected decline of U.S. Treasury yields, and U.S. dollar would give gold a good risk-reward, UBS said.
In early February, crude oil futures prices slipped into bear market and copper futures prices hit the lowest level since May 2017 with livestock price down around 10 percent from a few weeks ago. Meanwhile, gold futures prices maintained strong performance amid strong risk aversion demand in the market.
The price correction with commodities excluding gold reflected demand weakness triggered by the novel coronavirus on the back of factory shutdowns, less travel in China, value-chain disruptions and simple demand concerns in the near term, according to UBS.
Though the price correction of crude oil and base metals should not be surprising given the Chinese heavyweight status in global consumption, the price weakness in grains and livestock indexes overstated the demand impact from the coronavirus named as COVID-19, said UBS.
"This sharp price correction offers investors an opportunity to engage in yield enhancement strategies with crude oil, nickel or lead," UBS said, assuming that Chinese economic activity as well as commodity demand would recover from the second quarter of 2020 onwards.
The expected new production cut by the Organization of the Petroleum Exporting Countries and its partners would also guard against further weakness of crude oil prices, according to UBS.
Gold would remain an attractive diversifier within a portfolio context and the expected decline of U.S. Treasury yields, and U.S. dollar would give gold a good risk-reward, UBS said.
In early February, crude oil futures prices slipped into bear market and copper futures prices hit the lowest level since May 2017 with livestock price down around 10 percent from a few weeks ago. Meanwhile, gold futures prices maintained strong performance amid strong risk aversion demand in the market.
The price correction with commodities excluding gold reflected demand weakness triggered by the novel coronavirus on the back of factory shutdowns, less travel in China, value-chain disruptions and simple demand concerns in the near term, according to UBS.
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