January 02, 2013
In the first work day of the new year capital markets reacted positively to the US Congress’ resolution of the ‘fiscal cliff’ issue. The Dow was up 218 points. A few big stories underlie trends in commodity markets.
- The Loonie jumped more than a cent to $1.01 versus the USD. Jubilation that the US economy is not going into the tank.
- Gold was up sharply ($13), as was silver.
- Oil rose by $1 (WTI) to $92.86.
- Natural gas declined to $3.29 MMBtu (Henry Hub), further signalling a decline in drilling activity.
- Copper showed strength closing at $3.73/lb.
The predictions for 2013 and rationale are as follows.
- The Loonie will rise to $1.07 versus the USD. The US fiscal situation is far worse than Canada. Commodities for the most part look strong.
- Gold rose 5.7% in 2012. A 10% rise to $1850 is predicted in 2013. Why ? Central banks from the 3 largest economies, US, EU and Japan are actively easing monetary policy while the political leadership lacks the will to reduce spending.
- Silver will rise from $31 to $34 dollars due to the record demand for silver investment.
- The oil price will decline to around $80/barrel (WTI). US is discovering increased amounts of oil. It’s production is highest now than at any time in the last 15 years. Alberta oil sands production is also increasing.
- Natural gas will decline to $3.00 MMBtu (Henry Hub). Supply exceeds demand, further weakening already weak prices.
- Copper at $3.73/lb. will stay about the same. China is the big copper user, but US and European weakness balance this out.
Will check back in a year an report on my predictions. Happy new year !