2016 has been a good year for commodities. Prices of most metals and minerals were very close to entering into bull market territory by June (defined by a 20% increase from previous lows), rebounding from their lowest in at least 25 years.
Analysts from Macquarie Bank believe the upward trend is here to stay. They expect most commodities to either stabilize or increase over the next 12-24 months.
Macquarie Bank’s commodity research team wrote that “We have seen a shift to the right for many, with inventories now starting to draw.”
Commodities that lead the way in the short term are alumina, nickel and cobalt. Longer-term, analysts really like gold, silver, zinc, nickel, chrome and US natural gas.
Barclays’ commodities research team is also forecasting better times ahead.
In an FT.com article, it was reported that factors that support this include improving economic conditions in Asian markets and a weakening US dollar.
The article also said the bank cited a reduced emphasis on monetary policy, which could see governments use more fiscal expenditure to boost growth in the form of commodity-using infrastructure projects.
One of these commodities is nickel. Nickel is one of the oldest known metals with uses tracing back more than 5,000 years. It is often confused with silver due to its white shine but the metal has different properties in a few key areas. One of the most important differences is it that nickel is one of only a handful of elements that remain ferromagnetic in moderate temperatures making it a popular choice for magnets.
Nickel has a number of industrial uses across a wide range of sectors. Two of its most popular uses are in nickel steels which account for 60% of the metal’s use and nickel-copper alloys which account for another 14%. Nickel is generally prized for its anti-corrosive properties which makes a great compliment in steel production as well as in currencies. In fact, many are likely most familiar with the metal thanks to its use in U.S. coinage system and the five cent piece, the nickel. Although the coin is just 25% nickel today it is still one of the biggest uses of the popular industrial metal.
Investing in nickel has appeal thanks to its widespread use in industrial applications and its ability to serve as a hedge against the U.S. dollar and inflationary pressures in certain environments.
According to Barclay’s, investors’ increasing confidence is further boosting commodity prices, with cash flows into commodity funds totalled roughly $55 billion from January to August, beating the previous record for the same period in 2009.
Although the information in this commentary has been obtained from sources believed to be reliable, Transition Metals does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. Transition Metals will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided in this article is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.
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