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Weekly Investment Insights: Bring on 2014

One can expect a rebound in a range of commodities because of the rapid decline in price in the last quarter of 2013. Economic growth although smaller throughout major areas of the world will put an upward pressure on prices while over supply in many sectors will exert a downward pressure.  So except for a few commodities; prices should be somewhat stable in 2014.


So one of the great benefits is that markets are going to start taking over from politics in the energy world. The revolution in North America especially in the U.S and Canada is now spreading to Mexico and beyond.

 A pull back in new investment for metals is a reflection of oversupply.  Of course one can predict this will eventually bring a price surge as supplies dwindle but this can be a year or two away. There will be an effect in companies involved in the mining and processing industries.  The abundance in supply is more due to over investment in mineral extraction and production rather than the slow down in economic growth in China and elsewhere.


Futures markets show most commodity prices remaining flat or declining over the next 12 months, with the exception of gasoline, natural gas, and some food products. Oil prices are expected to decline due to an expected rise in non-OPEC supplies, and possible recovery from outages in OPEC nations. Copper and gold futures prices are flat but soybean and soybean meal prices are expected to fall on the prospect of a large South American crop in 2014.


The spike in oil this year and possibly next year with Brent will later lead to major declines as more and more supply comes on line particularly in North America. For 2014 there will be stability in price action for WTI less so for Brent. For minerals (precious and industrial) there is an over abundance in supply so look for lower prices for the beginning of the year.


There seems to be a consensus that prices in metals will have a downward trajectory for the beginning of the year at least but for some like gold for example may decline too rapidly leading to a spike in prices later in the year. The decline in growth in China will cool any upward pressure on most industrial metals.


There seems to be little enthusiasm for investments in commodities with the exception of  platinum and palladium due to worries about supply given the situation in South Africa.


Metal and crop prices are poised to rebound in 2014 as accelerating economic growth boosts demand, helping to staunch this year’s record retreat for investments in commodity-focused funds. Average annual prices for 15 of 23 non-energy commodities from aluminum to sugar will be higher than now, according to estimates from as many as 26 analysts compiled by Bloomberg. Corn may rise as much as 20 percent, platinum 23 percent and nickel 19 percent, based on the median of trader and investor forecasts in a survey that asked as many as 59 respondents to predict next year’s peak price for each of 15 raw materials.


Although gold will be off to a slow start next year the prediction here is with continued economic growth in key areas of the world (especially China) the demand for commodities will be stable with an increasing price pressure later in the year as supplies of key commodities dwindle