Saturday, September 20, 2014

What happened to commodities?

I am not so much of a commodity person. For an investor in commodity, I have always believed that the investor has to have a much better macro picture i.e. consumption of steel in the construction industry. Another example, edible oil market i.e. comparison between sunflower vs soy vs palm oil. What are their prices per metric ton. Which are consumed more etc? These are things that I am not able to understand well.

Look at the prices of major commodities here especially over their 52 weeks price range.

Similarly, for platinum, silver there must be some use for those i.e supply and demand - or real industrial use. Over the last decade commodities were doing well.

However, these have not been so for the last one year or even more. Read the news I picked up from BusinessInsider below.
Silver is getting crushed.
On Friday, Silver fell more than 3% to less than $18 an ounce, its lowest level in more than four years.

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The price of gold also fell about 0.8% and touched its lowest level since January. Gold has been weak recently and is approaching a four-year low.

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Platinum also fell to a nine-month low.
What actually happened. These commodities are no longer used for its real purpose i.e. industrial, consumption etc. They have been pretty much speculated. Or could it be China's slowed consumption? I am pretty sure we are not worse off today as compared to four years ago globally. Although it made some sense that gold were sought after during bad times or during period of uncertainties, but what about platinum, copper or silver? Aren't they sought after for industrial purposes?
For that matter I am not really sure whether palm oil has found its low.
For a while, investors have been very speculatively positive over commodities and they seemed to have lost their fangs recently.


Guy Fawkes said...

Felicity, what are your personal views on KL property market?

felicity said...

There is and will be a slowdown due to several factors:
- strong rise over the last few years;
- tightening of credit by banks with Bank Negara leading it;
- landed properties out of reach of many middle class.

However, KL to me is still more attractive than Penang and JB due to real demand as there are still a substantial number without properties.

Gallen said...

USD strength is killing commodities, Dollar Index (DXY) has been on an uptrend since early May 2014 and recorded sharp appreciation since July 2014, coinciding with the collapse in commodity prices.

felicity said...

I think equity making comeback as well

paperplaneinc said...

More people getting bullish on stock, which money flows from commodities to stocks. But I think it is really low, good time to pick up some commodities. I personally like silver

felicity said...

Ya between gold and silver, overtime probably I prefer silver. It looks like being oversold.

MS said...

Just want to know, how do you guys buy Silver? So, felicity isit a buy call for you. And you will slow down in the equity side?

felicity said...

I would not say that buying and selling silver as within my circle of competence - but for a metal that is of use, usually anything that goes down will go up back.