Commodities prices may do some base building this week, with a bias toward higher prices. Gold, silver, and petroleum all appear set to move somewhat higher in the weeks and months ahead.

Before they do that, however, prices may consolidate a while longer around recent levels. Gold and silver continue to benefit from investor interest in these metals as alternative assets.

The on-going financial strife in Europe is helping to keep investors interested in precious metals. Additionally, the gold and silver markets have tightened somewhat in recent weeks.

Many market participants, from bullion banks’ proprietary trading desks to smaller trading companies and institutional investors, have focused on this tightening, and are more willing to hold long positions in expectation of higher prices in the near term.

Overall, commodities are also benefiting from investor interest. Investors increasingly are coming around to the view that the recession has ended in most parts of the world.

European and Japanese economic trends remain worrisome, but stronger growth elsewhere is helping focus investors’ attention on commodities as assets the prices of which seem more likely to rise sooner in an economic recovery, with other assets such as real estate, equities, and bonds lagging.

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