Dubai - MENA Herald: Saxo Bank, the online multi-asset trading and investment specialist, reports today that copper is shrugging off its boring image and may become one of the commodities to watch in 2017 - if President-elect Donald Trump sees through his campaign pledge to invest more than US$500 billion in infrastructure.
However, at a presentation in Dubai today, Saxo Bank’s Head of Commodity Strategy, Ole Hansen, said that although copper prices surged to a one-year high following Trump’s election victory last week, speculators would be wise to avoid jumping the gun too soon.
Ole Hansen was speaking ahead of a presentation at the Capital Club tomorrow where Saxo Bank is holding a Gold and Oil Futures seminar featuring the CME Group: “While commodity markets as well as financial markets are continuing to adjust to the unknown prospect of four years with Donald Trump as President of the United States, most of the early market reactions were based on guessing which policies and actions will be implemented and which may turn out to be campaigning rhetoric.”
“Copper has also been supported by an improvement in Chinese data and a surge in speculative demand on exchanges from New York, London and especially Shanghai. A rally driven by a speculative surge will eventually need real demand to be justified and that could still take some time, not least considering the prospect for an oversupplied market in 2017.”
Meanwhile gold initially experienced a surge going beyond $1,328 an ounce after the US election result was announced, but following a later reversal and ongoing US dollar strength, the market is now observing reduced demand for gold.
“Gold has struggled to recover from the early October sell-off and as Donald Trump looks set to open the purse and pour money into the pockets of Americans through tax cuts and increased investments in infrastructure, inflation is likely to become a major theme into 2017,” said Hansen.
“An environment of rising inflation and political uncertainty is likely to support gold but for now it is challenged with both real yields and the dollar rising. It needs to break above $1,310 per ounce to re-ignite demand. Our longer term views still point towards higher prices but in the short-term the latest developments have clouded the outlook by the potential shift away from central bank support towards fiscal spending.”
According to Hansen, the crude oil markets have been mainly focused on OPEC and the cartel’s ability to provide a market supportive of a production cut. However, Trump is known to want to support the US oil industry in order to achieve independence from Middle East producers, which may have an impact on oil prices.
Hansen says: “Trump’s views on the Middle East - not least of Iran, where he has stated that the lifting of sanctions against Iran was wrong and that they should be reintroduced - combined with increased support for domestic producers will become a key focus for the oil market in coming months.”
“The oil market could eventually re-balance and move higher but hurdles to this process continue to come forward. With these important factors in mind, our forecast until the end of the year for oil is US$40 per barrel if Opec fails to deliver a production cut and US$50 if they succeed. In a year’s time we could oil recovering towards US$60 per barrel.”
Being a fully licensed Danish bank, Saxo Bank offers investors access to 30,000 financial instruments including equities listed on over 36 global stock exchanges, 182 currency pairs, 9,000 CFDs, 3,100 ETFs and ETCs, Futures and more. These instruments are all available through Saxo Bank’s trading platforms.
