The future health of global economies can sometimes be assessed by following the prices of commodities such as copper. We have covered this point before; copper is considered to be the most important of all the industrial metals. The significant breakdown that has occurred since we last reported, suggests that a slowing of the world’s economies is already underway.
Commodity prices: copper and oil
Parallel with the deterioration in the copper price has been a fall in oil prices – now back below $60 a barrel for the first time since the end of November 2006. The commodity sector, including the oil sector, looks to be set for further declines – not the sort of action one would expect if all was well with the world’s economic growth story.
Needless to say, the long-term bull market for energy and for commodities will remain secure even if this year there is a significant pull-back. The eventual arrival of China as the world’s biggest economy is set to happen which will unquestionably generate much higher commodity and energy prices. We will watch progress with care because once this important pull-back has completed, a new long-term investment opportunity will arise from which we intend RHAM managed portfolios to benefit.
Commodity prices: gold
Gold bullion continues to enjoy strength as its long-term bull market characteristics unwind. Since the low set in June, a considerable base has been built. The longer this base-building continues, the more exceptional will be the next leg up. For the time being we still view $650/oz as the next key level. Above that we will review portfolios and consider increasing the weightings by about five percentage points. Gold is the most likely beneficiary of a declining US dollar and is a potential hedge against unexpected economic developments. No wonder we are enthusiastic about it!
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.
For more from RHAM, visit https://www.rhasset.co.uk/