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    ‘Gold among best commodity opportunities’
    By: Bloomberg
    Published: 6 Jul 07 - 0:00


    Gold will be among the five best commodity-investment opportunities over the next two years because of declining production and growing demand from Asia, according to New York-based hedge fund Ospraie Management.

    Rising costs and a lack of investment have limited output in South Africa, the world’s largest gold producer, Peru and other countries, said Jason Mraz, head trader at Ospraie, which invests $7-billion in commodities and basic industries. He declined to give a forecast for prices.

    “We look at gold as a barometer of wealth in the world,” he said at the Commodity Investment Summit in London last week. “The underpinning of demand is very strong.”

    Growing purchasing power in Asian countries, such as India and China, has spurred demand for gold, pushing prices up 11% in the past year. Gold production dropped 3,1% to a ten-year low of 2 471 t in 2006, London-based research company GFMS said in a report last month.

    “As you get macroeconomic factors pushing gold down below $650/oz, there will be compelling investment opportunities for the metal,” Mraz said.

    Rising costs have hindered explora- tion by gold producers such as Barrick Gold, the world’s largest. Newmont Mining, the second-biggest producer, said in April its first-quarter profit fell 67% as output slumped and costs rose.

    “Cost curves are not allowing prices to go back to historical norms,” Mraz said. “We don’t think the mining industry has the ability to respond to demand. The compelling story is what we see in gold is indicative of other metals, which is a shortage of mining labour.”

    Agriculture, energy, barge transportation and so-called rare earths will also be among the best investment opportunities over the next two years, Mraz said.

    US shipments of grains, such as corn and wheat, to meet rising demand for biofuels will provide “unique opportunities” for barges, a part of the shipping industry that so far has been overlooked, Mraz said.

    Barge capacity has been constrained because of a shortage of carriers governed by the Jones Act, which requires that vessels that trans- port cargo between US ports be owned, built and crewed in the country and fly its flag. The statute, called a cabotage law, was introduced in 1920 to protect US jobs.

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