Fund manager U.S. Global Investors is long on oil and copper as money supply eases and favours BHP Billiton (BLT.L: Quote, Profile, Research) and Rio Tinto (RIO.L: Quote, Profile, Research) on valuation grounds but is cautious on gold, its chief executive said.
"The worst is behind us. It will be a modest, slow climb (for metal prices) over the debris of the credit collapse," said Frank Holmes, who is based in San Antonio, Texas, United States.
Holmes said the United States would need to upgrade its basic infrastructure while China's $585 billion (397.5 billion pounds) stimulus measures would support metal prices.
"Historically, (easier monetary supply) has been constructive for oil, which then is constructive for other commodities," he said.
Major central banks have recently ventured into quantitative easing, or direct expansion of the money supply, as a way to reflate sagging economies.
In China banks extended a record 1.87 trillion in new loans in March, state newspapers reported. Beijing has been encouraging banks, which are nearly all state-owned, to lend freely in support of the government's fiscal stimulus plan.
Holmes said oil prices would rise to a range of $65 to $75 a barrel in the next year. Crude prices traded around $48 on Thursday after hitting a record of $147 last July.
Copper prices were at $4,287.50 per tonne.
"I am a big believer that the world has been under investing in exploration and development of commodities and the environmental cost has been going up every year. That means prices have to rise if the world population rose," said Holmes, whose company has $2 billion under management. "That's for sure will happen."
Among his top picks of miners are BHP Billiton (BLT.L: Quote, Profile, Research), Rio Tinto (RIO.L: Quote, Profile, Research), Freeport McMoRan Copper & Gold Inc (FCX.N: Quote, Profile, Research) and Ivanhoe Mines Ltd (IVN.TO: Quote, Profile, Research).
Mining stocks are the best performers in Europe, with the DJ STOXX European basic resources index up 9.3 percent this year. The DJ STOXX 600 European market index is down 8 percent.
The fund manager said he was not surprised with the strong performance in miners this year as the currencies of many raw material-producing countries fell.
"Currency has collapsed. It's a function that if currency collapses then you have margin expansion," he said, adding that miners paid less for production but were getting dollars in return.
As for gold, he expects the price to fall $100 or to rise $200 in the next six months. The precious metal traded at $886.30 an ounce on Thursday after reaching $992.30 in February.
