When it comes to forecasting metal prices, one of MetalMiner’s core beliefs rests on the need to analyze metals markets within the broader context of commodities markets – not in a vacuum.
Thomson Reuters/Jefferies Index (CRB): January 2011-December 2014
Regarding a metal price’s movements, we would argue that:
Our historical analysis shows that a metal has far greater upside potential when the commodities market overall is in bullish mode. Since 2011, the commodities market has been in bearish mode, which has had a depressing effect on industrial metals. Despite having a good start to the year, commodities fell sharply in the second half.
The main driver of the drop was a stronger US dollar in the second half of the year. Commodities are now at their lowest levels in 4 years. Further declines to new lows will be a very bearish signal. Until we see the US dollar weaken, it’s hard to see commodities start trending up. Today, we’d characterize commodities markets as unhealthy, and this environment has not helped push metal prices up.
In other words, the upside potential of any individual metal will be limited until commodities turn up.
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by Taras Berezowsky
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