Commodities & Currencies

(Houston)

Oil has been doing well lately, putting a smile on the faces of traders and the shale industry and a grimace on the faces of everyday Americans. Well, Barron’s says the grimace won’t go much longer, as this oil rally is bound to fade. Oil is almost back to $60 after reaching $44 in July. However, for it to move any higher the market would need to be banking on geopolitical supply disruptions, which seems like a long shot to rely on.


FINSUM: The fundamental demand and supply picture simply don’t justify prices much higher than now, so we don’t think this run will be able to maintain its momentum.

(Houston)

Everything seems to be in boom mode right now despite the fact that markets and the economy have been decent for some time. One very positive sign for the markets is that commodities have been on the rise despite a long period in the doldrums. Metals and energy have both been doing well despite the structural issues that have plagued the sector for years. Oversupply seems to to have been quelled in oil, and inventories of various metals, such as nickel, have shrunk, leading to a price boom.


FINSUM: High demand for commodities is a very strong sign of economic expansion, so we take this as a reliable indicator that the economy may start to deliver on all the hype. Inflation to follow?

(New York)

Gold has had an interesting ride the last few years and is currently in the midst of a strong year. However, its recent performance may pale in comparison to what comes next, at least according to Barron’s. Barron’s says gold has the best risk/reward ratio of any asset class today, and that even if other asset classes keeps rising, gold investors will do well. They may really hit it big if we have another crisis, though. Additionally, fundamental factors like supply are waning, which should move the equilibrium price of gold up. The metal is up 11% so far this year.


FINSUM: Gold’s valuation certainly isn’t as lofty as many other assets classes after years of weak performance. But then again, gold’s value is so abstract it is hard to talk about valuation on a meaningful basis.

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