Dow Jones-UBS Commodity Index sees fall

The Dow Jones-UBS Commodity Index is down 9.66% so far this year.

In terms of sectors, the Dow Jones-UBS Precious Metals Sub-index has the strongest year-to-date gain of 12.80%.

Leading commodity analysts provided their market outlook for the remainder of 2010 this morning at the ninth annual Dow Jones Indexes Mid-Year Commodity Outlook.

Oil prices will eventually see a down-turn. "Oil has been a pawn in the economic recovery story and is being artificially supported by historic economic stimulus and economic puffery," said Phil Flynn, senior energy and general market analyst, PFG Best Research.

"Because of that, oil prices are in a range that will eventually see a down-turn, most likely breaking into the $40 range. Gasoline is back to $1.80 per gallon and Heating Oil is at $1.84 per gallon," added Flynn.

Grains prices have held steady for now. "Grains and oilseed prices have been testing the low end of their projected ranges but have held steady for now," said Jack Scoville, vice president, Price Futures Group.

"Right now, we are in the process of establishing low pricing areas that might hold for many years to come," he added.

Sovereign debt issues to be a primary driver behind gold prices next year. "Sovereign debt issues and flight to safety bid to be primary drivers behind gold prices in 2011 as investors seek currency alternatives and chase returns," said Matthew Zeman, commodity Futures Broker, La Salle Futures Group.

The expectation that the allocation to broad-based commodities will continue to increase.

"We are seeing increased allocations by institutional investors into broad-based commodities," said Jon Fraade managing director, UBS Securities.

"According to a recent FT/Towers Watson survey, approximately 2% of pension assets are allocated to this asset class and we expect that the allocation to this asset class and the sophistication related to this allocation will continue to increase," he added.

The Dow Jones-UBS Commodity Index, a diversified and highly liquid benchmark for the commodities markets, is composed of futures contracts on physical commodities and was introduced in 1998.

The Dow Jones-UBS Commodity index series consists of the Dow Jones-UBS Commodity Index comprising 19 commodities, nine sector subindexes and 28 single commodity subindexes.