Displaying items by tag: metals
Wells Fargo’s head of real asset strategy John LaForge says gold could hit…see the full story on our partner Magnifi’s site
Commodities have been doing great this year. The big rise in demand coupled with weak supplies because of COVID have led to a surge in prices. However, one bright spot—metals—might have some trouble looming on the horizon. There is increasing speculation that the US may scrap pennies. If that happens, it could put a dent in the copper and zinc markets. This dent would not only come from a lack of new demand, but the fact that pennies would be taken out of circulation and recycled. This would amplify the effect by boosting supply to the system and lowering demand for newly-mined metal.
FINSUM: This might have a strong psychological effect even though the total quantity of zinc from pennies accounts for less than 4% of total annual output.
Commodities are doing very well this year. Every big bank, including Goldman Sachs, thinks we may be starting a new commodities super cycle. The big question is exactly which commodities and who will be the big winners. Everything from food, to metals, to oil has been rising and this creates some clear winners, particularly producers of those commodities. That means a big windfall for countries like Saudi Arabia, Australia, and Chile, who are big net exporters of various raw materials. It is net importers that get hurt the worst, with an absolute behemoth—China—likely to suffer the most, as it is one of the largest buyers of commodities in the world. In fact, it almost single-handed drove the big commodities boom in the 2000s.
FINSUM: So the key here is picking the right emerging markets. Additionally, investors may want to double-think investing in oil, as production hikes could undermine prices quickly.
You have probably seen a few articles floating around, but the last several weeks have really hammered it home: we are at the precipice of a new commodities supercycle. The pandemic brought on a huge fall in commodities prices because of a tumble in demand. But as the economy is heating back up, demand is jumping and supply is not matching it. Raw materials demand has surged across the board. Most have been paying attention to oil prices, but check out others like copper and metals. Goldman sees the dawn of a new decade-long demand surge akin to what happened between 2000 and 2010, when the rise of emerging markets/BRICS drove huge raw materials consumption. This time around Goldman says that the green industrial revolution will create a “capex cycle” on part with what happened to emerging markets in the 2000s.
FINSUM: The bank also argues that social and tax policies that are favoring income redistribution to poorer households is bullish for commodities since those households tend to spend a higher percentage of it.
The market seems to be in a tussle with itself. On the one hand, some investors are feeling bullish on the economic outlook, while many others feel the recovery is losing momentum. The data isn’t helping because it seems to validate both sides. For instance, jobs recovery numbers have been strong (disappointing somewhat today though) and the overall dip in output is not as bad as many expected. Metals prices, like silver and copper, have been rising, a leading indicator of growing economic activity. However, consumers seem to be hurting with real income dropping tangibly because of the end of government stimulus checks.
FINSUM: It increasingly seems like a k-shaped recovery is taking hold on the sector level. Certain areas of business are doing very well, while others like airlines, retail and more are doing poorly. This appears to mirror what is happening in consumer spending, where the upper middle and wealthy are surviving fine, but the middle and lower classes are getting hurt badly.