Commodity prices are rising overall, including yellow, iron ore, timber and copper. However, some analisdollars say the increase in gold and commodity prices could be temporary and predicts a decline in the second half of the year.
Jim Wyckoff draws attention to the danger of inflation in the markets
As the world reopens, many, including Federal Reserve Governor Jerome Powell, warn of mounting price pressures in the near term. And many see these price pressures as they are already here. Markets are reporting large price increases in food prices, commodities, and housing finances. The agricultural commodity prices yellow surprised many. Kitco’s senior analyst Jim Wyckoff said:
Corn futures prices yellow just hit their highest in almost eight years… Soybeans are also nearly eight years old, and wheat futures are at an eight-year high. Pig futures are at a 6.5-year high. Chinese steel futures contracts are at record levels, the highest in 10 years, coffee futures prices yellow have hit almost four-year highs this week, and timber futures are at record levels. Those who think consumer and producer price inflation is not on the way may want to consider this paragraph.
Jeffrey Gundlach: There are many indicators that inflation will rise further in a few months.
However, the current debate is not about whether inflation will accelerate. It is about how persistent price pressures will be. The FED continues to argue that any price pressure this year will be “temporary” in nature due to base effects and supply chain bottlenecks. Some key market figures disagree with this view. Jeffrey Gundlach, chief investment officer and CEO of Los Angeles-based DoubleLine Capital, said in an interview with Bloomberg this week:
I’m not sure they think they know why this is temporary. How do they know this when a large amount of money is printed and we see commodity prices really increase tremendously? There are many indicators that show that inflation will not only be temporary but will rise further for a few months. Thus, we will see how the FED tries to draw the picture …
Capital Economics logos series: Commodity prices yellow may fall again by the end of 2021
Goldman Sachs also revised its commodity outlook for the next six months, citing strong demand. “We expect the biggest leap in oil demand ever, an increase of 5.2 million barrels per day in the next six months,” Goldman said in a note released this week. The only way to resolve the supply contraction in copper, which is approaching this record size and rapidly, is to rise to new record levels in price.
But some analysts are beginning to agree with the Fed’s “temporary” inflation outlook, at least when it comes to commodity prices yellow. For example; Capital Economics published a report predicting that the price of commodities will begin to decline by the end of next year. “After an extraordinary recovery from pandemic lows, we continue to expect most of the commodity prices to drop again by the end of 2021,” the firm’s commodity bottles series wrote.
sdollarser: Recent price increases will stimulate supply …
This means that prices will eventually fall to more normalized levels, especially when it comes to raw commodities. sdollarser explained that increased demand will be met with more supply, adding that agricultural commodities are close to their peak. Capital Economics sdollars adds the following to their comments on the series:
Although growth in demand should be strong as the global recovery accelerates, recent price increases will spur supply. This is especially true for agricultural commodities where output can react quickly to prices. The increase in prices last year will lead to an increase in both planting and harvest over the next eighteen months, which will increase the supply of most agriculture, especially major grains. Accordingly, we estimate that most of the farming prices will fall. The next few years…
BMO Capital Markets: Prices may be traded lower in the second half of the year
BMO Capital Markets raised its 2021 price forecasts for commodities such as iron ore (+ 17%), aluminum (+ 6%), copper (+ 5%) and palladium (+ 4%). However, prices still expect the yellow to be traded lower in the second half of the year. BMO Capital Markets commodities analyst Colin Hamilton commented on the markets and said:
The majority of industrial commodities are still in a downward trend towards H2, as policy normalization in China combined with high prices led to a pause in aggressive buying seen for much of last year.
TD Securities analisdollar Series: Commodity market will experience some major supply problems
TD Securities also said that the commodity market will experience some significant supply issues, which could potentially limit some commodity prices. “Reflationary impulses drive up commodities due to increased demand and lower real rates, but as supply-side support begins to loosen, more demand gains will be needed,” said TD Securities strategyisdollar series.
Capital Economics sdollars series said that besides the increased supply that should help meet the growing demand, some other barriers, such as stronger US dollar and higher US Treasury returns, could weigh on commodity prices. “We have forecasts that growth in China will slow down as policy incentives are withdrawn and the smoother growth in demand for Asian goods exports points to downward pressure on the yellow of industrial metal prices,” the report said.
Some st and analisdollarser await further losses behind gold prices
Although Capital Economics sdollars series does not predict that the current price increase will turn into a commodity super cycle, it believes that some metals will greatly benefit in the long-term transition to greener ones. Capital Economics sdollars adds the following to their comments on the series:
We doubt that the most recent rally was nothing more than a cyclical rise due to policy. However, we are seeing the range of prices for some metals heavily used in green to take advantage of the increasing demand in the coming years. We expect reduced demand, abundant supply and low marginal costs to gradually affect oil prices… EVs contain significantly more copper and aluminum per unit than conventional ICE vehicles. And most of the ‘green’ infrastructure metals… As a result, demand for metals may increase until 2030 when investment in mineral supply is reduced.
Gold prices entered bearish mode after the yellow rose early on Thursday. Now the gold prices are losing momentum yellow. Looking at the forecasts, some st and analisdollar are expecting more losses between gold prices.