The winter of commodity metals’ discontent has begun, and the sun of higher oil prices does not seem likely to shine until at least the second quarter of 2015.
How bad has the sell-off been for base and precious metals the past week? Well, not good. Our lead forecasting analyst, Raul de Frutos, analyzed some of the metals’ positions and not only will their stockings be filled with low-priced coal, but some of them are also on the supply-and-demand naughty list.
Silver & Gold
The apples of Yukon Cornelius’ eyes staged a rebound this week, coming back from their lows to post weekly gains and even a positive month, but our analyst’s outlook casts a Bumble-sized shadow on that holiday cheer. The silver and gold rebound is the equivalent of Black Friday for metals traders and investors. This is a bargain-basement deal that won’t come again until… silver and gold start losing value again. When the egg-nog wears off it’ll be 2015 and these precious metals’ fundamentals’ will still be stuck on the Island of Misfit Toys.
The good news is the Menorasaurus Rex is merely painted gold and made of plastic, so you can have your own in time for Hanukkah (December 16 is night number 1!) over at Etsy.com. Mazel tov!
The Dollar Grinch
Looking down on commodity-metal Whoville and licking its chops is investment metals’ true Grinch: the US dollar. Thanks to its continued strengthening and a hands-off policy from the Federal Reserve, the dollar has stolen even little Cindy Lou Stainless Steel Who’s presents this holiday season. Unlike Boris Karloff, this Grinch isn’t having a change of heart either. Our intrepid analyst points out, again, that prices might be even lower next year. Those presents are staying up on the mountain, kids.
The thing most likely to change that would be the Fed raising interest rates which might cause the dollar’s heart to grow at least 3 sizes. Until then, though, it’s open season on commodity metal Whoville with the dollar at a 4-year high.
OPEC Goes from Scrooge to Cratchit
The commodity it’s least hard to feel sorry for this holiday season is the one dragging the rest down: oil. For years, oil held most consumers hostage to the pump, working us harder and harder for those $5/gallon fill-ups, just like Mr. Scrooge worked poor Bob Cratchit. Well, now the shoe is on the other foot as OPEC has, itself, brought the price of oil down in an attempt to undercut its competitors.
Just as the holiday season began ICE January Brent, the international oil benchmark, fell by $6.50 a barrel to $71.25, its steepest one-day fall since 2011. Since then, it’s fallen even lower fluctuating around $60/barrel. The Tiny Tims in this scenario are investors in oil transportation and exploration. They just might not make it.
That’s it for the week in coal-filled stockings for commodities. Happy holidays from all of us at MetalMiner!