COMMODITIES FX
other lower- income countries, plausibly India, Indonesia or in Africa, that will pick-up the baton of “manufacturer of the world”. These
countries
could thus still substitute for China’s hither to voracious demand for raw materials. Yet, I don’t see this happening in the near
future and I actually
doubt other countries wil l exactly replicate the Chinese industrial model.
GOLD AND OIL The
apparent gold
conundrum and the “oh- so” benign increases in the oil price
If it is fair to say that industrial metal
prices are heavily
affected by emerging markets’ growth, the implications for
Why, many goldbugs think, has gold come so significantly down in spite of the Federal Reser ve’s reluctance to disembark from QE, Japan’s QE
on steroids combined
with massive fiscal expansion, l ingering concerns about the security of bank deposits
oil and gold are less clear
cut. In fact, demand growth for these “commodities” is less predominantly coming from emerging markets. Gold, unl ike industrial metals, is also often considered to be a global currency, as well as safe haven asset. Oil, unlike industrial metals,
is still the world’s main
transpor tation energy source and as such its demand is positively correlated to income ( in the sense that people with higher income can afford more freedom of movement).
in Europe, and continuing geopol itical tensions from Syria to Iran? Why is the oil price staying so low in spite of global GDP being at least 15 % higher than the pre-crisis level while global
oil production
has remained stagnant. What about the 500 mil lion Chinese entering the middle class over the next decade, and certainly all wanting to own and drive a car ?
Gold, global deleveraging and emerging markets demand transformation
Of course, it is very difficult to predict the gold price. Gold might be a safe haven, but it cer tainly is a ver y volatile
one. Gold typically
does well when central banks enact inflationary policies and bond yields are relatively low. This, I think, is a ver y interesting point because the 2013 correction of the gold price could thus be nothing less than the anticipation of QE tapering and the concomitant raise in bond yields. Add to this
a general
return to the “risk on” mood, and the picture is more or less complete. It carries, however, the implication that with the recent
resurgence of monetary
policy uncer tainty (arguably the type of uncer tainty markets most
hate), Source: World Gold Council, MIG Bank and downward pressure on yields, gold should FX TRADER MAGAZINE October - December 2013 25
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