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Commodities Will Surge in 2019, Goldman Sachs Predicts

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2019 will be the year of commodities, according to Goldman Sachs. The Wall Street mega bank strongly believes that raw materials are due for a large comeback in the coming months given the huge disconnect between prices and fundamentals.

Big Commodity Rebound Ahead

Energy and primary metals are expected to rebound strongly in the coming months as political uncertainty begins to subside, Goldman said in a report. The bank predicts the upcoming Group of 20 summit in Buenos Aires, Argentina to be the primary catalyst for the rally. The summit, which takes place Nov. 30-Dec. 1, will host bilateral trade talks between U.S. President Donald Trump and Chinese counterpart Xi Jinping. Although a hard deal isn’t expected this week, both sides are expected to make progress on resolving their year-long trade spat.

“Given the size of dislocations in commodity pricing relative to fundamentals — with oil now having joined metals in pricing below cost support — we believe commodities offer an extremely attractive entry point for longs in oil, gold and base,” analysts said in a report, as quoted by Bloomberg News.

“Many of the political uncertainties weighing on commodity markets have a significant chance of being addressed in Buenos Aires,” Goldman said. “This includes some improvement on the China-U.S. relationship and, like in the 2016 G-20 meetings, some greater clarity on a potential OPEC cut.”

Oil prices have been caught in a severe downward spiral emanating from strained U.S.-China trade relations, a slowing global economy and an oversupplied market. The Organization of the Petroleum Exporting Countries (OPEC) is expected to address supply concerns at its forthcoming meeting in Vienna, Austria next month, though the extent of the production cuts could be limited.

Other Raw Materials to Consider

Goldman’s view lines up with a recent Hacked.com analysis that raises the potential for a bull market in raw materials next year. Copper, aluminum and nickel could be due for a large rebound over the next few years as markets contend with a severe supply shortage following an extended period of underinvestment. The growth of electric vehicles is expected to underpin demand for copper and aluminum while the easing of trade tensions between the U.S. and China could generate additional support for crude prices.

Gold prices are also expected to rebound now that the market has priced in ten of 12 expected Federal Reserve interest rate hikes. This is critical from the perspective of the U.S. dollar, whose strength undermines demand for hard commodities. At the same time, a slowing U.S. economy will help bolster gold’s appeal as a defensive asset.

The G20 summit is also expected to boost some agricultural products. Goldman predicts that the easing of trade tensions will support soybeans and other grains.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Gold Price: Chinese Lunar New Year Stokes Buying Frenzy

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Gold notched fresh ten-month highs Wednesday and was on track for its third consecutive session in the green as physical demand from China provided another catalyst for the buying frenzy.

Bullion Approaches $1,350

Gold for April delivery reached a high of $1,349.80 a troy ounce on the Comex division of the New York Mercantile Exchange. That was the highest since last April. At the time of writing, the yellow metal was trading at $1,346.10 a troy ounce, where it gained $1.30, or 0.1%.

Bullion’s rally moderated at the start of February but has since come back stronger. Prices are up 3% since Feb. 11.

Further reading: Gold Rush Continues as Bullion Tops $1,340 for the First Time Since April

March silver futures rose 6 cents, or 0.5%, to $16.03 a troy ounce. The platinum spot price surged $8.84, or 1.1%, to $828.49 a pound.

Chinese Demand

Precious metals are seeing higher demand not just from traders, but consumers as well. The latest buying frenzy came on the heels of Chinese’s recent Lunar New Year celebrations, which culminated in the first week of February. The week-long celebration is known to trigger high demand for jewelry.

That was the key takeaway from the latest weekly report from Metals Focus. Analysts at the British research firm issued the following statement regarding China and the gold rally (as quoted by Kitco):

“Some manufacturers we talked to said they have received healthy stock replenishment orders, since business reopened on 11th February, while others expect retailers to return after the Lantern Festival (19th February). This lends more confidence to our forecast that the Chinese jewelry market will enjoy further modest y/y growth in 2019.”

Large orders ahead of the holiday allowed the firm to reiterate its forecast for a 3% rise in Chinese jewelry demand this year. That follows a similar increase in 2018.

China is at the center of an ongoing trade dispute with the United States that has threatened to not only undermine global economic growth, but the price of gold as well. China remains heavily dependent on exports to sustain its economy and any disruption in trade flows could hasten an economic cooldown that began more than five years ago.

Beijing has sent an envoy to Washington to continue negotiating a new trade agreement. Both sides have until March 1 to reach a new agreement before tariffs on Chinese imports are reapplied. However, President Trump has expressed willingness to let the deadline “slide” if both sides made enough progress in their talks.

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Gold Rush Continues as Bullion Tops $1,340 for the First Time Since April

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Gold’s relentless push higher continued on Tuesday, as the yellow metal topped $1,340.00 a troy ounce for the first time in over ten months.

Market Update

Gold for April delivery surged $18.40, or 1.4%, to $1,340.50 a troy ounce on the Comex division of the New York Mercantile Exchange where it was eyeing its highest settlement since Apr. 19, 2018. Bullion has gained in back-to-back sessions and three of the past four days.

The yellow metal has rallied 4.6% in 2019 and 12% since the fourth quarter began.

Silver futures also produced solid results on Tuesday. The March futures contract rallied 18 cents, or 1.2%, to $15.93 a troy ounce. That’s the highest in almost three weeks.

Precious metals are being propped up by a declining U.S. dollar, which is currently mired in a four-day slump. The U.S. dollar index (DXY), which tracks the performance of the greenback against a basket of six peers, fell 0.2% to 96.70. Since peaking at two-month highs, the greenback has lost 0.4%.

Can’t Stop Gold: Yellow Metal Notches Ten-Month High Despite Improved Risk Sentiment

Markets Await Data Flow

A somber mood on Wall Street and in Europe may have also contributed to the rally on Tuesday as investors shifted their attention to macroeconomic data from key markets. The large-cap S&P 500 Index was trading flat by mid-morning. European markets were all lower. That being said, gold’s recent performance has been largely uncorrelated with stocks and other risk-on assets.

The Federal Reserve will release the minutes of its latest policy meeting on Wednesday. Central bankers voted to keep interest rates on hold last month and signaled dovish turn in their forward guidance. The prevailing view for now is that the Fed will not raise interest rates in 2019. Some analysts believe the central bank is more likely to cut rates before raising them again.

A steady stream of PMI data for European and U.S. markets are scheduled for the latter half of the week. On Thursday, the U.S. Department of Commerce will report on durable goods orders, a key proxy for factory demand.

Central-bank speeches from the Fed and European Central Bank will make headlines on Friday. In the same session, Germany will report on fourth-quarter GDP. The European Commission will also release its revised consumer inflation report for January.

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Can’t Stop Gold: Yellow Metal Notches Ten-Month High Despite Improved Risk Sentiment

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Gold prices rallied sharply on Monday, as the yellow metal shrugged off traditional headwinds including rising bond yields and improved risk appetite en route to fresh ten-month highs.

Price Update

Gold for April delivery climbed $7.70, or 0.6%, to $1,329.80 a troy ounce, its highest level since April on the New York Mercantile Exchange. The contract traded as high as $1,330.80 a troy ounce.

Bullion has been riding a wave of momentum since the fourth quarter began, as a worsening stock-market outlook and global trade tensions weighed on risk sentiment. Since the beginning of October, the yellow metal has rallied nearly 12%.

Silver has followed a similar trajectory as gold. On Monday, the grey metal edged up 5 cents, or 0.3%, to $15.79 a troy ounce. Silver futures peaked at seven-month highs last week.

The gold-silver ratio that is used by investors to determine when to buy and sell precious metals is moving in gold’s favor amid the recent wave of buying. As of Sunday, the ratio stood at 83.83. This basically means that 83.83 ounces of silver are needed to buy one ounce of gold.

Dollar Demand Ebbs

Gold’s ascent on Monday came as demand for the U.S. dollar continued to slide. Since peaking at near two-month highs, the dollar index (DXY) has declined in each of the past three sessions. On Monday, it was down a further 0.2% at 96.71.

The dollar bulls have been in the driver’s seat for the past two weeks, as global trade uncertainty and political turmoil in Europe weakened demand for competitor currencies. A synchronized slowdown in the global economy, particularly in Japan, China and the Eurozone, has also propped up the dollar relative to its peers.

Gold outperformed riskier assets during the fourth quarter and has retained its strength during the stock-market rebound of 2019. The dollar emerged as the haven asset of choice for investors fleeing global economic and political risks. With the U.S. and China making progress on a new trade agreement, stock traders have been able to breathe a collective sigh of relief. Read more: Stocks Surge on U.S.-China Trade Optimism; Dow Notches Eighth Consecutive Weekly Gain

The U.S. financial markets were closed on Monday for President’s Day. Despite their recent strong performance, stocks may struggle to keep the momentum alive as the S&P 500 Index approaches a key resistance level. The outlook on earnings has also deteriorated, presenting new complications for equity traders.

Additional insights: Does this Chart Spell Doom for the S&P 500 Index?

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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