Global investment banks have started revising their price outlook upward for hard commodities like base metals, coal and precious metals. They see demand outweighing supplies that were curtailed over the past few quarters across commodities. Crude oil and precious metals have already seen sharp upmove from low levels. Crude was quoted around $25-26 per barrel, and gold was below $1,100 six months ago. However the recovery in metals has been slower as they were facing resistance at high levels. Zinc, which is up over 20 per cent, is an exception. CITI Research's global commodity team has upgraded sea-borne thermal coal price forecast by 17 per cent to 37 per cent for 2016-17. "We maintain our view that the thermal coal price in China will continue to recover in the second half of 2016 as coordinated supply cuts outpace demand decline," it said in a recent note. CITI is also bullish on cement and steel and says the former will do well due to modest demand support in the second half, with disciplined supply. It sees a near-term upside for steel margins but remain bearish in the medium term, as planned capacity cuts will mostly be those in already idle steel mills. Jefferies' Global Natural Resources, Metals & Mining Research forecasts upward revision in all metal prices for the next two quarters. The US brokerage has revised aluminium average price forecast upward by 4.5 per cent, copper by 0.9 per cent and zinc further 7.3 per cent for 2016. CITI Research sites three major factor that would revive commodities. It says funds would increase bets on commodities. "Strong performance of commodities to resume this quarter and through the end of the year, buttressing renewed financial flows into commodity structures, including both physically-backed ETFs and passive long-only investment vehicles. This is in stark contrast to the last two years, during which time commodities sold off during second halfs leading the asset group to be the worst-performing as compared with equities and debt securities. Another factor according to CITI would be, "overall commodity markets continue to lurch toward rebalancing as global demand continues to grow at a moderate rate while the pullback in capital spending is reducing not just supply growth but total supplies across nearly all extractive industries." "Newly expanded and deepened Panama Canal should have a noteworthy long-term positive impact on Atlantic to Pacific commodity trade flows, especially of agricultural and energy products from the US into the Pacific Basin (both Latin America and Asia)," it said. CITI has upgraded crude oil to average $52 in September quarter against $35 in Q1 and .$42 in Q2. Similarly it has raised targets for copper, tin, nickel by one to three per cent higher while zinc is up at $2,140 per tonne average from June quarter average of $1,925. Even in the agri space, it has raised target prices for coffee, cocoa, sugar and soybean. Most brokerages are bullish on gold and silver for next two quarters, Bank of America Merrill Lynch is most bullish. It sees gold prices rising to $1,500 an ounce in the near term, predicting that polarisation of politics would lead to further economic uncertainty and gains for the yellow metal. Risk aversion and investor anxiety has also boosted silver, which has forged ahead of gold in the wake of the Brexit vote. The Devil's metal, as it is sometimes known, has risen more than 40 per cent this year and breached $21 last week. BofA-ML said in its report "an overshoot of price to $30 an ounce is possible," for silver which is driven by retail rather than institutional investor, is a much smaller market than gold and prone to sharp moves and volatility.

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