Foreword ‘Fiscal Cliff’ Avoided


Eurozone collapse Averted China slowdown Alleviated


NOW THAT’S WHAT I call a AAA rating. But could it turn out to be as spurious as those issued by the rating agencies leading up to the latest financial crisis? The Mayans were wrong after all and so markets


rushed into 2013 with a spring in their step sending the Dow to new peaks. With Armageddon averted, capital markets are on a roll.


So after what many people prefer to describe as an extremely “challenging” year in 2012, this edition finds markets in good cheer (so far) as investors propel equities sharply higher on the back of improving fundamentals and stronger anticipated corporate profits.


The best news continues to come out of north


America with the US economy surprising even the most bullish pundits on its emergence from recession. Tie this to the likelihood that major central banks – including the Fed – will continue with loose money, and the prospects for price gains in markets (including the commodity complex) look justified.


Renewed optimism feeding equity and bond


markets has, of course, had the reverse effect on the gold market. Bullion traders are now divided on the outlook for prices, but if current bullish capital market sentiment persists – even in the absence of any compelling evidence for a widespread economic recovery – gold prices will be susceptible further (see page 25).


2013 should also be the year that a final


resolution to the eurozone crisis is cast. If we are at a watershed, the political fallout from any deals struck could be the real test for markets, especially if the outcome and reaction to Italy’s recent election is anything to go by.


The theme of markets is now the gradual


relaxation of tight correlations that have bound asset performance in broad ‘Risk-On / Risk-Off’ cycles over recent years. Since the onset of the Great Recession collective panic followed by collective euphoria has repeated itself time and again. At last there are signs that investors and


analysts are being more meticulous and targeted in their investment and trading choices.


At the same time, there is talk that some


money managers are giving up on commodities following the poor returns of late – and who can blame them. If true, it could be a poor piece of timing given the still fragile economic outlook in many parts of the world. In any event, if global growth does in fact exceed the markets expected 3-3.5% this year, prices in some parts of the complex (where supply and demand is finely balanced as in some industrial metals), look set to move substantially higher.


The best news continues to come out of north America with the US economy surprising even the most bullish pundits


As ever, it’s the detail that counts in assessing


the fundamentals when deploying funds to this market – and preferably in a dynamic way.


Commodity investors and traders operate in


a global marketplace where trading in high risk territories is often inevitable. However, as a consequence of the economic crisis, the Arab Spring and populist politics, political risk poses a greater threat – and greater opportunity – for traders and investors than in the recent past. Here, some other A’s spring to mind– Assad and Amejinedad.


The articles that follow will hopefully assist


readers in navigating a way through some of the key issues and considerations which are stretching market professionals as they make their asset allocation and trading choices. •


Guy Isherwood, Publisher and Editor. March 2013 1


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