Commodity Blog

Commodity Forecasts

Gold prices declined this summer, which can be expected, as summer is traditionally bad season for gold (among some other commodities). What’s important, prices fell from the all-time high, but remained on very high level historically. Despite recent declines, most traders remain very bullish on bullion, and this outlook proves correct (at least for now) as the precious metal resumed its climb to higher level.

The first reason to be bullish is seasonal demand. The period from September through December always was strong period for gold historically and we have no reason to believe this year to be an exception. There are many holidays, which are favorable for the precious metal, including Islamic Ramadan, at the conclusion of which many Muslims buy gold for good luck. Then, there is wedding season in India, historically biggest market for gold. Moving to the West we’ll have later the New Year and Christmas, and returning to the East the lunar New Year.

For longer term, trader can consider other factors (which actually influence prices in short term too). The obvious upward driving force is the concerns for the global economic recovery, caused by troubles in Europe and US. In the same time, Asia becomes more prosperous, especially China and India. Gold historically has great appeal for the people of these countries, not just for its aesthetic value but also as a safe haven for hard times. This means that they tend to hoard gold, but aren’t inclined to part with it easily. And the demand for gold will only grow as the citizens of India and China are becoming richer.

So, where gold is heading? Obviously, higher. For the short term, it may rise $100 or $200 higher before pausing its rally, but for the longer terms it has potential to rise much, much higher. Of course, some correction may be possible, but level of $950—$1050 should be level of support.

Judging from the chart’s structure and Japanese candlestick patterns, the author of this commodity forecast video offers his vision of the future of gold trading. The bottom formed last week was a pivotal point on the daily chart. It’s a lower low that’s usually followed by lower high. Traders may expect a top to form somewhere between $1,215.00 and $1,235.00, before the gold will be able to decline farther.

Sugar prices tend to be unpredictable, as they demonstrated at the first half of this year, slumping dramatically instead of rising, as traders expected. Recently the prices showed signs of some recovery, though. So, where do we stand now, what can we expect? In fact, sugar prices again show unpredictability as analysts provide completely different opinions on this matter. Such turn of event isn’t surprising, as the prices very dependent on weather, which itself quite hard to predict.

On the positive side, we had dry weather in June, import levy in India and outlook for stable demand. Drought might damage crops in Thailand, reducing yield by 10–15 percent. Some experts say that adverse weather may harm next-year harvest in Brazil too. Even in case of big harvest, Brazil may experience problems with delivering it to foreign importers, as it’s currently unable to load sugar on all ships waiting in ports. India may impose 40 percent tax on imports, supporting the price. India may actually keep its supplies from global markets to meet the local demand.

On the negative side, outlook for growing supplies makes it unlikely for sugar price to rise significantly. Indian tax, while supportive for the price, unlikely to boost it higher than current level. India expected to produce about 26 million metric tons of the sweetener, from which around 500,000 tons might be exported. Forecast for Brazilian harvest for the most part shifted from promising lower supplies to predicting higher output. Brazil’s output may climb 14 percent to as high as 41 million tons. Economists say that global deficit would shift to surplus of about 5 million tons in the next season.

All in all, there is no reason to expect major upswing of sugar prices. The prices expected to remain for the most part in the $0.15-$0.18 range. Price of $0.13 can be considered a good buying opportunity.

Sugar prices declined, but some analysts expect the rebound. Bullish forecasts say that global sugar inventories will decline to 32 percent of total consumption, 52.8 million metric tons, in the year to September 30th. While sugar prices decline after reaching the record level, the inventories still need to be resupplied and current low prices may help in this, which, in turn, may drive prices up. With civil unrest in Thailand and South Africa’s exports being lower than expected demand may exceed supply.

Bears point out on signs of increasing supply. Thailand’s government claims that it has restored order. India may turn from the largest consumer in the world to a net exporter, while Brazil’s output continues to grow. This expected to cause global sugar supplies to turn to surplus in the year from October.

July delivery for raw sugar fell 4.9 percent to $0.1419 per pound last week on ICE Futures U.S. in New York. Thus, prices resumed their bearish trend, which was reversed this month.

Oil prices were heavily hit by the economic recession in 2008, but now they are rapidly rebounding. Will this trend continue in the next years?

In fact, analysts expect the so-called Oil Peak. Global production probably isn’t ready to satisfy quickly growing demand. While developed countries are expected to keep their consumption of oil on stable level or even experience a slight decline of demand, developing countries, primarily China and India significantly accelerate the rate of their consumption, leading to noticeable jump in the global demand in coming years. China’s oil demand has increased 28% over a year by January 2010. In the same time, any noticeable increase of production isn’t expected. OPEC considers their current level of production in target range and isn’t planning to expand it. There is expected an increase of output from Non-OPEC producers, but it’s unlikely that their supply will be enough to satisfy the ever-growing demand. New sources of oil, like findings in Brazil, Columbia and Mexico looks perspective, but it may take a lot of time before the actual drilling will begin.

The growth of oil prices may be not very noticeable in the next two years as the economies worldwide are struggling to recover. Crude oil prices averaged $84 per barrel in April 2010. Oil prices will average about $84 per barrel over the second half of 2010 and rise to $87 by the end of 2011. By 2015 consumption should exceed supply by 10 million barrels per day (MBD). By 2030 the global demand will reach 118 MDB, while producers will be able to supply only 110 MBD. Barring any unexpected major occurrence, like developing and implementing some new sort of fuel instead of conventional gasoline and diesel fuel or significant easily accessible find, by 2030 crude oil price will soar above $100 per barrel level, maybe even jumping as high as $150 per barrel.

The gold performed well from the beginning of this year. While it hadn’t jumped as much as some experts expected, the metal generally retained its trend to rise, if not with the tremendous pace. The gold stayed above the $1,000 level, but can it conquer new heights?

Nowadays it looks like the gold can be considered more like the alternative currency than the commodity. And, as such, it can benefit from the uncertainty in the currency market and the need of the investors for the safety. The situation with Greece let many believe that Europe has some deep-seated problems, which can’t be resolved in near future, and the bailout, offered to Greece, isn’t the actual solution, but the hasty attempt to do at least anything, which may be futile in the end. Of course, other currencies benefited from the resulting weakness of the euro. The dollar is one of such currencies as it is still considered as the safe haven for the investors. But how long will it last? Some analysts think that the debt problem may hit the U.S. too, weakening the dollar and striping the currency from its importance for the global economy. Many countries, China in particular, are already beginning to sell the dollar and amassing the gold. And the gold may become very attractive as an alternative currency as it’s not that much prone to the inflation as the other currencies.

The physical demand, like the demand from the jewelry industry, was subdued by the growing prices. Yet it may be slowly restoring itself as the customers are becoming accustomed to the new prices. What’s more important, the physical demand may provide the support for the gold prices as the customers will be buying more gold if its price would fall.

Some analysts think that by the end of the year the gold price may reach as much as $2,000. But most don’t support such optimistic outlook, claiming that the precious metal will stay in the current range. But despite some disagreement over the short-to-medium term gold performance, almost all agree that over over the long-term the metal looks bullish.

Analysts say that sugar may continue to fall as the technicals don’t support its price. It will be difficult for sugar to rebound unless it will rise above $500 per metric ton. Some traders refrain from purchasing sugar on the expectation of lower prices. May delivery for white sugar fell $6 (1.2 percent) to $483 per ton on the Liffe exchange.

Soybeans rose to the highest level this week on the speculation that China, the largest oilseed importer, will help its currency to rise versus the dollar, decreasing the cost of buying U.S. supplies. The Chinese government is going to let the yuan to appreciate, hoping to keep the rate of the inflation in check. Chinese oilseed processors have purchased about 15 cargoes of soybeans in the previous week after the profit margins rose. May futures for soybean delivery gained $0.0424 (0.4 percent) to $9.4875 per bushel by 12:00 on CBoT.

Uranium prices may begin advance at the end of this year with growing demand from utilities. Supplies from recycling Soviet-era warheads and enrichment facilities can’t catch up demand from such countries as South Korea, China, Russia and India. Analysts predict that prices may climb from $40 per pound to as much as $100. Immediate delivery for uranium oxide concentrate rose 2.4 percent from previous week to $42.25 per pound.

Sugar advanced in New York for a second straight day as importers are planning to increase purchases after prices have dropped. Demand may be supported by rising imports in India and Iraq. Previously prices rose because adverse weather damaged harvests in India and Brazil, then prices declined on speculation about rebounding global production. May delivery for raw sugar advanced $0.0012 (0.7 percent) to $0.1763 per pound by 9:52 on ICE Futures U.S.

Analysts think that soybean imports by China, the largest buyer in the world, may rise to a record as increased crusher capacity and growing demand for livestock feed may put strain on global supplies. The country consumes more than half of the global soybean exports. China plans to import about 45 million metric tons in the year ending September 30th, 5.9 percent more than previously predicted. While soybean meal consumption fell since January, this decline is considered to be temporary and demand should rebound in the near future.

Yet some analysts are rather pessimistic about soybeans prices. They insist that even with increasing Chinese import supply may exceed demand. World production increased 40 million tons (20 percent) this year, partly because of record harvests in Brazil and Argentina. The contract for May delivery traded at $9.6050 per bushel in Chicago today. Soybean futures fell 8.4 percent this year.

Analysts think that platinum may soon touch $1,662 per ounce. Forecast reverted to bullish after price exceeded $1,617 level, highest in the previous week. Analysts predict that the next higher resistance level will be $1,704. Platinum traded at $1,637.53 as of 10:19 in London.

Cattle futures gained for the fifth straight session on concern that dwindling stockpiles will boost prices for the U.S. beef. Adverse weather impeded weight gain of cattle. Cattle futures also rose on speculation that recovering economy will spur demand for a meat. June futures for cattle delivery gained $0.00275 (0.3 percent) to $0.939 per pound by 11:28 on the Chicago Mercantile Exchange.