Credit Suisse says that it remains a long-term commodities bull, despite recent negative sentiment.

Philipp Vorndran, an investment strategist for Credit Suisse’s asset management business, believes that the commodities super-cycle is not over and that over the medium-term, commodities will provide higher returns than the consensus forecast. He believes that the global economy will be more robust than most assume and that, as a consequence, commodities will come under the spotlight again for positive reasons in the second half of 2007, if not sooner.

“Looking forward, commodities will continue to show volatility. However, there is a strong upward underlying trend in many of the soft commodities, and while we see energy and base metals fluctuating in a broad range, we believe that there will be some upward bias later in 2007 as the global economy re-accelerates,” Vorndran said.

“The leading commodities indices have in recent weeks given back all the gains notched up since the beginning of October. The weakness is fundamentally due almost entirely to a slump in energy prices, triggered by remarkable cuts of speculative positions. Also, the mild weather was a negative on gas demand, and lesser so on the consumption of oil,” he added.

“More important, is the uncertainty in the short term over whether the new OPEC quotas will be observed and the current caution among investors. Energy investments have lost so much of their appeal for investors in recent weeks, which has resulted in a significant drop off in investor demand. However, the re-emergence of political tensions and possible disappointment regarding Non-OPEC production growth could quickly lead to a resurgence in investor sentiment,” Vorndran noted.

“Copper, which has plunged more than 30% from its high of US$8.800 per ton in May, has also continued to come under pressure. This is the most economically sensitive industrial metal, and its price is still being depressed by fears of a slump in the US housing market. Globally, demand for copper from the US is only a secondary factor here; a much greater risk would be if an economic downturn were to spill over into Asia. This is the region that is really driving growth in demand for commodities. However, we think the scenario of a hard landing in both the US and Asia is highly unlikely and there are already first signs of a renewed pick-up in copper demand from the region,” he added.

“Meanwhile, the picture is different for most other commodities, which have recently made gains – or at least held steady. Soft commodities have fared particularly well, while industrial metals – with the exception of copper – have held firm,” he concluded. “Precious metals have turned in a solid performance and prices continue to be supported by strong demand from jewelers as well as from financial investors. There are also constraints to the supply side as mining supply in South Africa is declining and central banks are reluctant to continue their gold selling programs. The combination of supply constraints and strong demand is key to our positive long term view of precious metals but even we were surprised to see such robust demand dynamics in the usually weaker first quarter of the year.”