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Don Coxe says rapidly rising oil prices on the back of political unrest could lead to a recession that may derail one of the biggest bull runs for base metals in history

TORONTO (Reuters) -

The recent spike in oil prices could derail one of the biggest bull runs for base metals in history, said Donald Coxe, one of Canada's most influential money managers.

Coxe, who has close to four decades of investment experience, says rising crude prices, triggered by political unrest in the Middle East and North Africa, could even lead to a recession. A surge in food prices across the globe has made matters worse, he said.

It's easy to see why he feels so wary. Coxe, a former Bank of Montreal strategist who now heads Chicago-based Coxe Advisors, saw his commodity strategy fund decimated during the economic meltdown in late 2008.

Despite the hit, he has held firm to the belief that commodity prices will keep rising as long as emerging economies keep expanding.

"The China and Asian story is intact. The only thing that can derail that is if we have a global recession. As of six weeks ago that was a very remote possibility," said Coxe. "Then we had the collapses of governments across North Africa and moving into the Arab world."

While stopping short of predicting a downturn, Coxe warned that the latest oil shock could slow growth and hurt base metal miners. Producers of copper and other metals have benefited from a sharp run-up in prices that most analysts see extending into 2011

"The evidence is that food and fuel prices together were as of January taking the biggest share out of consumers pockets in two decades, and it's just going to get worse," said Coxe. "So I believe the likeliest thing is a slowdown."

"What base metals need is strong economies across the world, and the events of the last few weeks call that into serious question. I think the risk level has risen higher," said Coxe, who is moderating a panel discussion at the annual PDAC mining convention in Toronto this year.

PDAC, or the Prospectors & Developers Association of Canada, hosts an annual convention that is the biggest global gathering within the mining industry.

The event attracted over 22,000 attendees last year and with metal prices on a tear, organizers expect an even larger audience this year.

"The best thing that can happen is the price of oil pulls back to 80 bucks a barrel. The oil companies will still make money, it would take the fear out and we wouldn't have to push gas prices in the U.S. to $4.50 a gallon," he said.

Is it all bad news for miners? Coxe says no. If political turmoil continues, then gold -- the traditional safe haven metal -- is bound to do well.

Coxe said the relative attractiveness of gold, as opposed to base metals, has risen because the risk level has changed.

"Gold is the bad news metal. If good news outweighs the bad news, gold will be at the end of the year where it is today, if the bad news outweighs it we could be up to $1,700 gold by the end