ABN AMRO sees most commodity prices declining further for the remainder of 2013 before strengthening next year on economic recovery-led demand, according to the bank’s Quarterly Commodity Outlook published today.
The improving outlook and sentiment for the US and China will support cyclical commodities, especially base metals, in the near term. Price increases of 5-10% are predicted for aluminium, copper and zinc are predicted in the coming quarter, with nickel expected to strengthen even further. Platinum prices may also benefit.
Despite signs of a return of gold’s traditional role as a safe haven asset (and positive correlation with the VIX), the bank sees the metal in a long term bear market on investment-related liquidiation and as fears of a Eurozone break-up continue to subside. The bank has brought forward its forecast of USD 1,000/ oz to end of 2014 from end of 2015. Silver is expected to fall to USD 20/ oz this quarter.
"Our view is that the global economic recovery will continue and that fears over the slowdown in China are overdone. Although we expect most commodities will fall for the remainder of the year, base metal prices will rise in the near term as demand increases – led by China and the US," said Casper Burgering, Ferrous and Base Metals analyst at ABN AMRO.
Record sugar and coffee crops in Brazil will lead to oversupply, although robusta is expected to hold its value while arabica prices fall. Cocoa prices will appreciate due to successful Ivory Coast cocoasector reforms and a drop in global stocks.
In energy, ample supply and seasonally weak demand will dampen oil prices until later in the year. US natural gas prices will ease after weather conditions in the US have normalised and some stock building is seen.
A full summary of ABN AMRO’s commodity prices forecasts can be found overleaf, along with contact information for the bank’s Group Economics analysts.
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