Low levels of exploration in the mining and energy sectors in the past decade has set commodities ma...
Low levels of exploration in the mining and energy sectors in the past decade has set commodities markets up for a significant boost once the imbalances caused by war in Iraq has cleared, according to analysts at JPMorgan Fleming.
The company says industrialisation in China and other parts of Asia continues unabated, yet because of the huge investment flows into technology during the 1990s it looks as if global demand will narrow the gap to supply considerably.
Annual demand for gold is already ahead of production, even as forward sales covering the next two years of production are starting to close and gold production is forecast to start falling.
In the current global economic environment, those companies that do want to boost output are often finding it cheaper to acquire a competitor rather than take on exploration costs of their own.
That in turn means that the number of companies is falling in different commodities sectors, while mining and energy exploration is being put off, creating further future imbalances.
JPMF also says that the mining industry is relatively unscathed by the false accounting issues that have hit other sectors, which should provide additional confidence among investors of the potential for gains in the next few years.
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