Iron Ore Price, page-15381

Oil and metals outlook emboldens commodity bulls

After five grinding years of losses, commodities are set to end higher in 2016 and investors are staking out increasingly bold calls for the coming year.

This reflects signs that the prolonged decline in markets such as oil and metals is finally having an effect. Cuts in capital spending by producers have begun to choke off supplies as global demand creeps higher.
It might not be a replay of the powerful “supercycle” of the early 2000s, when economic growth led by China put a strain on natural resources, but for the first time in a long time, commodities are out of trouble.

“The supply and demand scenario is tightening, and therefore prices have to go higher to increase supply. That’s the theme for 2017,” says Paul Kim of Aventis Asset Management, a Chicago-based commodities hedge fund.
The Bloomberg Commodity index (BCOM), a basket of 22 futures contracts, has risen nearly 10 per cent in 2016, on pace for its first annual rise since 2010.
The performance has varied widely among BCOM members, with zinc up more than 60 per cent this year, diesel fuel up about 45 per cent and wheat suffering a 12 per cent fall.

Wall Street turning bullish

Some Wall Street houses have turned bullish. Goldman Sachs last month advised clients to buy the GSCI commodity index, eliding memories of oil shocks and food crises to argue that “high commodity prices can be good for the world”.

Citigroup was once known to lean bearishly on commodities, but no longer. “There is absolutely no doubt that markets are at a turning point,” Ed Morse, Citi’s head of commodities research, says in a video presenting an annual commodities outlook. “We believe that momentum is going to carry through and generate even greater returns for investors in the year ahead.” A portion of banks’ revenue comes from selling commodity derivatives to investors.