Barclays warns of a “rush for the exits” on commodities
The commodities that Braclays focuses on is oil and copper. Although these commodities have experienced a nice bounce recently they argue that the supply and demand fundamentals plus the continued economic slowing around the world will again put pressure on price.
The key line is at the end when Barclays states “We very much doubt that recent large inflows to commodity investments are the start of new wave of enthusiasm for long-term, broad-based exposure. Given the weakness of underlying fundamentals, we suspect that the latest move into commodities by investors may be closer to its end than its beginning”. This is crucial because if the investment that has come into the market is not long-term holders (which I believe it is more traders looking for short term gains) then the run might be over very soon. We are already seeing oil fall back, will the other commodities follow?
Click here to read the full article over at the Telegraph website.
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Analysts at Barclays have warned of a “rush for the exits” as investors back away from commodities, resulting in price levels for oil and copper dropping as much as 25pc.
A note issued by the bank said that although investors have been attracted to commodities as one of the best performing assets so far in 2016, returns are unlikely to be sustained in the second quarter of the year.
“This could make commodities vulnerable to a wave of investor liquidation that we estimate could, in a worst case scenario, knock as much as 20-25% from current price levels,” the note said.
This would take the price of oil back to the low $30s and copper to the low $4,000s, the analysts said.
The bank said that the recent price appreciation does not seem to be well founded in improving fundamentals, and that key markets such as oil and copper already face overhangs of excess production capacity and inventories.
Net flows of investment into commodities totalled more than $20bn in January and February, the strongest start to a year since 2011.
But futures positioning in copper and oil markets has switched from bearish to bullish extremes in a matter of weeks, and there is also evidence of a surge in investment flows into Chinese commodity markets.
Barclays said a short-term turning point for investors slow might be close, which could result in investors liquidating assets quickly, and at the same time, hitting prices.
“We very much doubt that recent large inflows to commodity investments are the start of new wave of enthusiasm for long-term, broad-based exposure. Given the weakness of underlying fundamentals, we suspect that the latest move into commodities by investors may be closer to its end than its beginning,” it said.
Who mentioned gold? Their focus is copper and oil. Even Jeffry Christian knows (“admits” is more like it) that gold is a financial asset and trades like a currency not a commodity.
Commodities still have technical work to do but their 25% “rush for the exits” warning belongs in the LOL file.
Agree Matthew. I think Bird throws gold into anything that looks like it might decline. He is definitely a bear, uh bird.
The article title is “A rush for the exits on commodities” and as both of you know gold has indeed been trading as a resource product and not a currency for several years. Notice it too has had a fair correlation to the Canadian dollar which itself correlates to the CRB Index and all have been in decline together since 2011. None of us should be in disagreement on those basic points.
BTW Gator, I am not picking on gold. As you know I accurately called the bottom back in early December and made out OK with my metals shares. But I am also a realist and have unloaded all the positions as the fun and games have now ended.
So its not personal. I trade both sides.
Re: “…gold has indeed been trading as a resource product and not a currency for several years.” —That is absolute nonsense. You obviously missed the fact that gold more than doubled versus commodities in about a year.
…AND hit a seven or eight decade high versus oil. Gold was recently worth about 6.5 times as much oil as it was in the summer of 2008 – despite having a dollar price that was only about 20% higher.
I did not miss anything Matthew. But for gold what we saw was little more than a relief bounce (albeit a strong one) after a long period of declines. Gold is still in a bear market though. There is no question about that. So that means we should anticipate continued declines and eventually new lows. The technical pattern is pretty clear and the set up in the general markets are anything but bullish for the coming month. I would sell the rally’s if I still held any miners.
Unless your singular focus is to trade in and out of gold versus oil there is no reason to watch that pair because it won’t help your case.
Sorry Bird, my case doesn’t need any help whatsoever. Gold absolutely SMOKED commodities over the last two years. Conversely, commodities outperformed gold while it rose nominally from 2001 to 2008.
Lumping gold in with the commodities complex is an amateur’s mistake.
It doesn’t get any simpler than that.
Look at the monthly charts Matthew. Gold is a commodity. Compare chart to chart and there is little difference as almost everything went down together since the tops in 2011. I appreciate you want gold to be different by showing a selected period but I am very sorry….gold is not all that special and it certainly is not trading as a currency.
As you will soon find out (again).
Here, scan these 5 year charts for yourself. Everything has ups and downs but the majority were in decline over that period. Anyone can cherry pick instances when one commodity outperformed next to another for a certain period but the overarching trend was undeniable unless you were buying Canola, Lumber, Hogs and Cattle.
You need therapy buddy. You have lost all perspective.
Commodity and Currency Futures – Five year charts ——— FINVIZ.com
http://finviz.com/futures_charts.ashx?t=ALL&p=m1
Moving down versus the dollar does not make it a commodity. That’s ok, you tried.
Amazing how you gold bugs never get the point. Whiiiizzzzz. Right over your heads. Its probably why I get such satisfaction when some of you get splattered on the windshield.
Bird..if you are short you are on the wrong side again. Look at the weekly and monthly charts. The increase in gold took out the down trend line and has held support. The metals are looking strong along with the miners.You don’t have to be a bear to be popular. We like birds too.
Neither long nor short today, Gator. I am timing this for today or tomorrow. Just depends on how the last hours play out. I HATE being too early just as much as I hate being too late.
Anyway, change of subject now since gold is boring today.
You have GOT to watch this video I just saw on ZeroHedge about Chinese condo construction. This is freaking bizzarre. How the builder is not in jail is beyond me. Just check it out. If you know anything at all about concrete you will know these guys were for sure NOT Italians!
Puts a whole new perspective on the word “bubble”.
“Made Out Of Sand” – A Dramatic Look Inside A Newly Built Chinese Apartment
http://www.zerohedge.com/news/2016-03-29/made-out-sand-dramatic-look-inside-newly-built-chinese-apartment
Smash theses f00ls to the stone age!!!!
She Sheppard is preparing the sheep for slaughter. Smashin’em
https://www.tradingview.com/chart/SI1!/Pn6w7ZM1-Sell-Silver-Rallies/
Mad Max are you Stewie per chance?
Is Barclays any better at forecasting than Goldman? Or are they talking their book? Just an opinion and everybody has one.
I watch a lot of stocks. Certainly not every day, since I like to believe I actually have a life.
I have been concentrating on clean energy recently. Not because I believe in Global warming, but because, if the electorate is stupid enough to allow governments to promote the fallacy, then why not also take advantage of tax-payer beneficence, and Green (Marxist) activism.
This is NOT investment advice.
Polaris Infrastructure Inc. (OTCPK:RAMPF) is a renewable energy company running a 72 MW geothermal plant in Nicaragua. The company was founded in 2008 as Ram Power Inc. but, after a radical restructuring, two weeks ago its name was changed to Polaris. Due to serious business and financial problems, the former Ram Power was not widely covered by the financial media. Now, after a major restructuring, the company looks better, so I’m watching this one.
No money in free energy………..GREAT idea……..
geothermal has been around for awhile….the oil companies have done a great job smashing this technology .
Thanks CFS. I remember Ram Power and totally missed the restructuring, but knew it was bound to happen eventually. I believe Casey research plugged it years ago, but it was a flop. Maybe it will go from zero to hero this time.
I am going to watch it as well.
So what do you think of Alterra Power corp that Marin Katusa, Doug Casey, and Rick Rule all like so much?
Bird…amazing video…thanks..eye opening regarding China and their ghost cities…
Isn’t that a shocking video?
I was just floored. Stunned maybe is a better word. What the hell is holding up the cement ceiling above those two guys? And how about all the other floors above? So much for housing being a store of value.
All Chinese people need to feel disgust because that is a sign of very deep, entrenched corruption in their housing sector. What are the odds the real estate miracle there is on its very last legs when you see garbage like that masquerading as investment.
Its over man. It is so over.
Very interesting, positive reaction (move-up) from the PM miners today (at least in my portfolio) with a fairly modest increase in gold and silver (e.g., JNUG was +18% today)
One of the TA people I follow is basically saying this is a pullback and consolidation phase; gold (the metal) is headed to US$1450. Using the Weinstein model for Stage 2, we may be looking at 100%+ moves in selected PM miners if gold goes up another $US200 from here.
Just saying ….
Stage 2 would be nice, but if that’s the case, I need to add more to my miners!!
Until Gold closes definitively above $1308 and $1321, I don’t see a run to $1450 happening the first half of this year, and maybe not even the 2nd half of this year. If those 2 targets get taken out, then that would become the game-changer.
Yeah, I don’t see it happening until gold takes out $1449 😉
Agree 100 percent. Expect gold to fall, not break out over 1300 dollars and furthermore I would anticipate a protracted decline for the balance of this year as price ebbs and flows back to the point at which it started this run before ending the year lower.