‘Saint’ Nik’s top picks for investing in commodities in 2016
- Gold bulls wake up
- Oil bears roar into 2016
- Copper calls it quits
It’s that time of year when children up and down the country are getting excited about Saint Nick’s imminent annual trip down the chimney with his sack of toys. But it’s not just Father Christmas who is spreading seasonal goodwill. In the spirit of the season, Nikolas Xenofontos, Director of Risk Management at leading online trading services provider easy-forex has shared his top picks for investing in commodities in 2016. He comments,
“There are three commodities to watch closely as we head into 2016: gold, oil and copper. They bear watching for very different reasons, but all three may have an influence on global financial markets over the year ahead.”
2015 has not been kind to gold and as we head into the expected US rate hike in December, things are looking even worse (the better than expected US jobs data from November was enough to convince investors that a rate hike is certain). The result was a multi-year low for gold of $1,075 per ounce – down 9% in just two weeks.
Gold rallied as a result of the terrorist attacks in Paris on 13 November, with investors rushing for the shiny safe haven and pushing the price back up past the $1,200 mark and confidence around the precious metal has remained surprisingly high. Increasingly, investors are taking the view that gold really can’t fall much more than it has, even in the face of rising interest rates.
The result is likely to be one of two scenarios. Either the Fed doesn’t increase rates, which is bullish for gold, or rates are increased but the hike has been expected for so long that decreases have already been priced in. After an awful 2015, 2016 may just be gold’s year.
While 2016 is looking positive for gold, the opposite can be said for oil. The global glut has seen prices dip below the $40 per barrel mark on numerous occasions and current stockpiles are in the region of three billion barrels. Easy-forex’s Nikolas Xenofontos observes,
“Demand for oil is rising, especially with 7% growth forecast for India, but output is rising too. With US shale outputs, OPEC keeping up supply and the expectation of Iran oil entering the markets, even turbulence in the Middle East and ongoing terrorist events are unlikely to save oil prices from new lows during 2016.”
Copper’s outlook is also bearish for 2016. Prices have halved since the highs seen in 2011, with falling Chinese demand having a huge impact. China consumes 40% of the world’s copper and also influences global metal prices through speculation. With demand for copper (which is used mainly in wiring) at such a low ebb, prices will need to continue falling enough to stimulate rebalancing. Until then, it’s bears for the red metal.
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