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Entertainment Wide-ranging rally: Experts forecast commodity bull market

06:25  23 february  2021
06:25  23 february  2021 Source:   finanzen.net

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After commodity prices fell at times during the corona crisis last year, they have been on the upswing for some time. According to experts, this is likely to continue - they expect a commodity bull market.

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• Soy, copper, oil and much more: commodities rally broadly

• Rising demand, inflation concerns and US dollar support

• Experts forecast bull market for commodities

Some commodities have increased significantly in the past few months. For example, the price for soybeans rose by almost 40 percent last year, for the copper price it rose by almost 26 percent in 2020 and the oil prices were also able to recover from their bitter losses and are now quoted again Pre-crisis level, with the price for a barrel of the US WTI variety reaching a new 52-week period at 61.14 US dollars in mid-February - the price for a barrel of the North Sea Brent at 64.34 US dollars.

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The current rally is wide-ranging: In the specialist asset manager SummerHaven, all positions from a basket of 27 commodity futures - from coffee to nickel - achieved positive returns in the six months to mid-January, including any profits from the extension of futures contracts, reports the Financial Times and quotes the managing partner Kurt Nelson as follows: "This is really unusual. We look back on 50 years and have never seen that this basket of goods has increased consistently".

These factors support commodity prices

Commodity prices were supported by various factors, such as demand from China, the world's largest consumer of natural resources, writes the Financial Times. Another catalyst, according to Kurt Nelson, was investors' ulterior motive that fund managers would be encouraged to hedge in the commodities market due to rising inflation due to monetary and fiscal policy designed to cushion the consequences of the pandemic. Since most raw materials are also valued in US dollars , they have become cheaper in other currencies due to the depreciation of the US dollar in the past year, which is increasing demand.

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According to Eliot Geller, partner at CoreCommodity Management, the macroeconomic background for commodities is stronger than ever in the last ten years. "Since 2010 the stock markets have rebounded, a strong US dollar, interest rates are lower and inflation expectations have fallen," says the Financial Times Geller. "Today we face rising inflation, a weaker dollar and interest rates that are already zero or negative."

As reported by the Financial Times, some experts predicting a new super cycle also point to global recovery programs that place greater emphasis on job creation and environmental sustainability than on controlling inflation.

Experts predict bull market for commodities

Some US banks are therefore recommending that their clients increase their exposure to commodities, which can benefit from a recovery in the global economy supported by fiscal stimulus and the current vaccination campaigns. Some even predict a repetition of the so-called "super cycle" of the 2000s and thus a longer phase of resource-intensive growth. At that time, oil and metal prices hit new records due to China's rapid industrialization.

"It is easy - and largely accurate - to present the raw material outlook for 2021 as a V-shaped vaccine trade," the Financial Times quoted the experts at Goldman Sachs in a recently published report. "What we think is critical, however, is that this rebound in commodity prices will actually be the start of a much longer structural bull in commodities."

Other experts are of the opinion that the market is not yet ready for a new super cycle. "What we certainly have right now is a cyclical rebound, fueled by inventory replenishments in Europe, the US and China, and exacerbated by supply disruptions," said Financial Times George Cheveley, portfolio manager at Ninety One. The expert sees a broader shift, however, "two to three years away". Finanzen.net

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