Base Metals
Agriculture
Base metal prices have been weaker to begin the year,
but levels should be supported by improving global
manufacturing activity. The recent uptick in prices,
attributable mainly to a rebound in Chinese economic activity,
was due to short covering and is not sustainable. Prices
should continue to move lower.
US corn production should be higher than last year, and
inventories should recover. Growth has also slowed in the
use of ethanol. As a result, corn prices are expected to be
marginally lower going into next year.
Copper demand indicators have been healthy, but a surplus
market is expected moving into the latter part of 2013 and
into 2014. Mine supply growth has been very strong, Chinese
demand is decelerating and inventories have been building.
These signals point toward lower copper prices, but this
outlook could change if Chinese growth begins to accelerate
once again.
Soybeans have been affected by wet spring conditions, which
slowed planting, followed by drought-like conditions in the
US Mid-West in August. South American production has
been stronger in 2013, and has led to ample global stock.
Prices are expected to trend lower into the first half of 2014.
Wheat production is expected to be higher this year, due to
increased production in Canada, EU and Australia, while US
stocks are expected to tighten. Wheat prices should see some
weakness in the early part of 2014.
Precious Metals
Gold prices have been buoyed, albeit temporarily, by the Fed
decision to delay tapering. As a result, gold prices should be
strong to the end of the year, but the weakness could resume
in the first quarter of 2014. The exact timing will depend on
the Fed’s tapering timetable. Once the Fed begins to taper,
the dollar will strengthen, equity risk premiums will move
lower, and long-term interest rates will rise. Concurrently,
gold prices will begin to fall again. Beyond the short term, it
is difficult to forecast prices, as it will depend on the levels at
which the dollar and long term interest rates settle.
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